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Peter Arrowsmith FCA highlights a selection of NIC matters, and provides a helpful tip for elderly couples.

Reliefs Being Abolished

The recent publication of the 'Consultation on the Abolition of 36 Tax (sic) Reliefs' provides more detail as to the timing of the withdrawal of reliefs as announced on Budget day. Those concerning NIC are -

• certain payments to mariners disregarded - obsolete provisions, withdraw by Regs as of 6 April 2012,
• cycle to work days and associated breakfasts - withdraw w.e.f. 6 April 2013 (Finance Bill 2012),
• late night taxis - withdraw w.e.f. 6 April 2013 (Finance Bill 2012),
• luncheon vouchers - withdraw w.e.f. 6 April 2013 (Finance Bill 2012),
• disregard for certain apprentices and students coming to the UK - withdraw by Regs as of 6 April 2012,
• assistance in identifying lost or stolen credit cards - withdraw by Regs as of 6 April 2012,
• Class 1A - exception for prescribed general earnings (this has only ever been used for the previous regime of childcare reliefs and pre-1998 relocation expenses) - withdraw through first available NIC legislation (timing unknown), and
• Class 4 loss relief brought forward from before 6 April 1990 where the losses are other than from a trade, profession or vocation. This was a transitional provision in respect of spouse's losses when independent taxation was introduced - withdraw through first available NIC Bill (timing unknown).

Personal Liability Notices Stand Good

Stephen Roberts and Alan Martin v HMRC (TC1130) is, from memory, the third PLN case to come before the Commissioners (in the past) or the Tribunal (now). The legislation in SSAA 1992 s 121c was explained to us when introduced as being intended to target 'phoenix' companies. This case is the first of the three where that is, in fact, the situation.

The facts were in my opinion hopeless and suffice to say the appellants were not successful.
Prior to the hearing both R and M had been disqualified from being directors for four years. The latter was a Chartered Management Accountant and had to resign from his professional body as a result.

No More Class 3 Can be Paid

John Augustine Garland (TC1135) was born in Ireland in 1928, came to the UK at the age of 20 and worked here for a short time and paid UK contributions. He then spent more than a decade with the Kenyan Police.

He worked and lived in various other countries subsequently. In 2008 it was established that by virtue of EC Regs 1408/1971 he could pay UK Class 3 contributions for a period of residence in Ireland from 1984 to 1994 - this brought his UK state pension entitlement to just above the 25% minimum required at the time of his reaching SPA. He now sought to pay Class 3 for the time spent in Kenya. The Tribunal held that he could not do so as he did not meet the test in the National Insurance (Residents & Persons Abroad) Regs 1948 Reg 5(2).

The case was distinguished by HM Revenue and Customs from the favourable Kearney decision, as HMRC claimed that Kearney was built upon an apparently wrong decision involving the aforementioned 1948 Regs by the then DHSS in the 1970s which HMRC then had to accept in subsequent dealings.

No Reduced Rate Election

In Janet Mary Spraggs v HMRC (TC1193), S was more fortunate than past contenders in convincing the Tribunal that she had not made a married woman's reduced rate election. HMRC contended that she had done so in 1974/75 and this was evidenced by the payment of reduced rate contributions and the declining of sickness benefit claims on those grounds. Nonetheless, the RF1 record form did not actually record that the election had been made and balancing all the evidence the Tribunal sided with S - who can, in my opinion, count herself rather fortunate.

As a result of the decision, it appears that her state pension will rise from 67% to 100%.

Car Benefit Due

The case of McKenna Demolition Ltd v HMRC (TC1204) concerned the provision of a car and fuel to the director. He had other cars and claimed that the car provided by his company was a pool car or an emergency vehicle. The grounds were hopeless and the appeal inevitably dismissed. Arguments likening this case to the circumstances in Industrial Doors (Scotland) Ltd (TC571) did not hold water.

Tip of the Month - July 2011

Readers with elderly clients should ensure that where the younger in a couple reaches state pension age and a dependency increase has previously been claimed by the older (and taxable on them), consideration is given to replacing that with the younger spouse's own state pension - even if paid by virtue of the other's contributions. The latter will then be taxable on the recipient, often at lower rates or covered entirety by the personal allowance.

Every case is different and the precise circumstances need to be checked, but often in the past when the two benefit rates were the same, the tax position has decided the matter. The position is now accentuated as in recent years the rates have diverged - the dependency increase is now only £58.80 per week as against a full rate Category B state pension at £61.20 per week.

The above is taken from 'NIC Newsletter' (01/07/2011), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.