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Peter Arrowsmith FCA highlights a selection of NIC matters, and provides a tip about 'demands' for payment of National Insurance Contributions more than six years old.

The NIC Small Earnings Exception for the Self-Employed

It was previously possible for an employed person with a small, separate self-employment not to pay Class 2 NICs without the need for a Small Earnings Exception application. This was provided the self-employed profits were £1,300 or less for the year in question.

As a result of the HM Revenue and Customs review following R v IRC, ex parte Wilkinson [2005] UKHL 30 this easement has now ceased (HM Revenue and Customs National Insurance Manual NIM20011).

Company Car for the Company Secretary

S Barnard Ltd provided its company secretary (who was the wife of the controlling director) with a BMW car, costing about £32,000. The company did not account for Class 1A National Insurance contributions in respect of the car. HM Revenue and Customs issued a ruling that the company was required to pay Class 1A contributions. The company appealed, contending that the provision of the car was 'normal commercial practice', within ITEPA 2003 s 169(4). The accountant acting for the company claimed that it was quite common for a company secretary to be provided with a company car but could not cite actual instances due to client confidentiality and the Data Protection Act. Presumably, he knew it was normal commercial practice because he advised other clients to provide such cars. The First-Tier Tribunal rejected the contention and dismissed the appeal, finding that the company had provided insufficient evidence to support its claim. (TC 491)

More Applications to Pay Voluntary Class 3 NIC Arrears (To Boost State Pension) are Rejected

Mr Langthorne (L) was born in 1930. From 1955 to 1967 he worked in Bechuanaland (now Botswana) and did not pay any UK National Insurance.

He returned to the UK in 1967. In 1995 he discovered that, because he had not paid National Insurance from 1955 to 1967, he would not receive a full state pension. He applied to pay backdated voluntary contributions. HMRC rejected his claim on the basis that his failure to pay these contributions was attributable to his 'failure to exercise due care and diligence', within Social Security (Contributions) Regulations 2001, SI 2001/1004 Reg 50. The First-Tier Tribunal dismissed the ensuing appeal, and distinguished the case from that of HMRC v Kearney [2010] EWCA Civ 288 [ see NIC Update - May 2010 - Ed. ]. The Tribunal concluded that L 'was aware of the National Insurance scheme before he went to Bechuanaland' and holding that 'by not informing the DHSS on his return in 1967 that he had been working abroad for 12 years, even though he made enquires about "self-employed" NICs, he did not exercise due care and diligence'. (TC 475)

Missing National Insurance Contributions

Patricia Register v HMRC (TC 490) is another case where the NIRS record was accepted as being correct by the Tribunal.

R found at retirement that there was no record of Class 2 payment from 1970 to 1976 with the result that she was due to receive only 95% State Pension. She claimed that stamps had been bought at the Post Office and affixed to the relevant contribution cards (as was the norm in those days) and then handed in to the local social security office as required. As receipts were inevitably not given for the handing over of the cards, she could not evidence the contributions she claimed to have paid. The Tribunal was not persuaded of any inaccuracy in the computer records and the appeal was dismissed.

Tip of the Month - June 2010 - Resist HMRC's Trying to Collect 'Old' NICs

Some readers will recall that in the past I have cautioned against settling supposed 'demands' for payment of National Insurance Contributions more than six years old. And by that I meant (and still mean) six years from the due date for payment (nothing to do with the start or end of the tax year in question).

Newcastle has, over the years, been extremely irritating in making such demands and also - if challenged - alleging that the Limitation Act 1980 means something other than what it does in fact say.

No more - as I understand new guidance has been issued by Head Office to the effect that HM Revenue and Customs should NOT be requesting payment where enforcement is not possible.

I say 'no more', yet I have seen TWO further such letters since this guidance was issued.

This therefore means that, whilst the number of these instances should steadily decrease even further over forthcoming years, I'm sure there will be the odd exception still. Be alert! - do not pay and do not admit liability - and that includes not getting involved in telephone discussions about the matter. Take specialist advice where needed.

The above is taken from 'NIC Newsletter' (28/05/2010), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.