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Peter Arrowsmith FCA outlines a selection of NIC matters, and reminds small employers about the enhanced recovery of Statutory Maternity Pay available to them. 

Heads in the Clouds

Following on from the Castle Construction case that I mentioned earlier in the year, [ see NIC Update February 2009 - Ed. ] another status case that doesn't involve IR35 has rightly been lost by HM Revenue and Customs.

In one of the first cases to be reported under the First-tier Tax Tribunal reference (although it was heard on 30 March), namely Sherburn Aero Club Ltd v HMRC Commissioners (TC6), the flying club engaged flying instructors to provide tuition to its members at its own premises using its own aircraft. The instructors notified the club as to when they were available to take lessons - though this could be changed at very short notice - and they were free to work elsewhere. They had, however, to follow a syllabus laid down by the Civil Aviation authority (CAA) and were subject to the flying orders set out in the Flying Order Book.

The Club treated the instructors as self-employed, but HMRC issued tax determinations and NIC Notices of Decision that they were employees for 2005/06 and 2006/07.

The Club's contentions were broadly upheld in that it was found that there was no mutuality of obligations and that the control test for employment was not met.

Both this case and the Castle Construction case seem to reflect both increasing aggression and desperation on the part of the authorities, together with - it seems to me - an increasing lack of understanding of the law, especially in the area of mutual obligations.

Tips subsidy to National Minimum Wage at an End

The Court of Appeal heard the National Minimum Wage (NMW) case of Annabels (Berkeley Square) Ltd in January and the decision was handed down last month in favour of HMRC. This means that employers should be paying the NMW regardless of any tips, gratuities, service charges or cover charges that are not paid by the employer through the employer's payroll.

In the meantime BERR has confirmed that the NMW Regulations will be amended as planned with effect from 1 October 2009.

Pension forecast relief

Ian Pearson has confirmed in a Commons Written Answer that where a person applied for a state pension forecast before 6 April 2009 but received the forecast after that date, HMRC will accept Class 3 contributions at pre-6 April 2009 rates provided that the payment is made within one calendar month of the individual receiving the forecast.

Compulsory e-filing for all - Well, almost all

Draft amendments to the PAYE Regulations have been issued for consultation until 3 July. There will be associated NIC regulations when the tax regulations are finalised.

The draft regulations will extend the present compulsion to file P35s and P14s electronically to all employers (i.e., including those with less that 50 employees) in respect of their 2009/10 returns onwards.

The online requirement will not apply to any PAYE scheme which ceases to pay any employees during 2009/10 AND where the return is filed on paper BEFORE 6 April 2010.

Beyond this, the present plan is that the following employers will also be able to claim exemption from the requirement to file online -

• religious groups whose beliefs are incompatible with using electronic communications,
• those operating 'Simplified PAYE Schemes' - these are for domestic or personal employees whose taxable earnings do not exceed - currently - £160 per week / £700 per month,
• care and support employers.

The last group relates to an individual who employs a person to provide domestic or personal services at the employer's home where -

• the employee's services are provided to the employer or a member of the employer's family, and
• the person receiving the services suffers from a physical or mental disability, or is elderly or infirm.

A care and support employer, to be able to claim the exemption, must not previously have received an online filing incentive and must have filed their return themselves, i.e., not via an agent, bureau, etc.

Contracting out - State Pension Age changes

Although State Pension Ages are increasing for women from next April (and for both men AND women from 2024), the age at which Guaranteed Minimum Pension is payable remains at 60 for women and 65 for men. The Contracted-out Deduction will be based on the GMP at these respective ages, plus any inflation proofing up to the new State Pension Age.

Contracted-out rebates to Contracted-out Money Purchase schemes and to Appropriate Personal Pensions will, however, be payable up to and including the tax year prior to the one in which State Pension Age is reached.

Tip of the Month - June 2009

Small employers should remember that they can recover in total 104.5% of any Statutory Maternity Payments made, as opposed to the lower amount of only 92% for larger employers.

A 'small' employer for this purpose is one whose gross National Insurance Contributions payments in the previous tax year were £45,000 or less - gross means before the deduction of any Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay or Statutory Adoption Pay recoveries in that previous year.

The above is taken from 'NIC Newsletter' (01/06/2009), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.