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Peter Arrowsmith, FCA, with a summary of recent NIC developments, and a reminder about the benefits of paying HMRC using the Faster Payments system.

Tax/NIC Alignment

The consultation on aligning ‘the operation of’ tax and National Insurance contributions scheduled for April and then delayed until May has now been deferred until the autumn. Some commentators are proclaiming the death of the plan at this stage. That may yet be so, but we are looking at a difficult task here and I would rather there be a delay now if that means we end up with some meaningful changes rather than some of the window dressing that we have had in past decades.

Perhaps I’m being unduly hopeful (which – true – is not like me), but I for one am not giving up on this idea until at least next year!

Class 1A – Security Enhanced Cars

The Budget announcement that the enhancement cost element would be excluded from the benefits regime (backdated to 6 April 2011) did not mention National Insurance. A recent HM Revenue and Customs document states that where the conditions under the new,proposed law are met, the cost need not appear on the P11D and where that is the case Class 1A is not due for 2011/12. This is a welcome change of stance as in relation to previous backdated tax changes, the line has always been (and the justification has never been clearly correct in my mind) that Class 1A must be paid on the basis of the tax legislation as it was actually in force as at the P11D deadline date. This year’s Finance Bill containing this change will not actually have been enacted by the first week of July, so this sensible and pragmatic view is more than welcome.

Changes in Advisory Fuel Rates

The following new car fuel advisory rates apply to journeys undertaken on and after 1 June 2012 - see Company Cars - Advisory Fuel Rates from 1 June 2012.

These latest rates are based on prices per litre of 135.8p (petrol), 141.7p (diesel) and 78.7p (LPG).

Advisory fuel rates are the HMRC approved rates at which employers can reimburse their employees for business travel in company cars, or to require employees to reimburse the cost of fuel used for private travel in a company car without attracting a fuel benefit charge. For the purpose of these rates, HMRC treats petrol-hybrid cars as petrol cars.

During June, employers can use either the previous or the current rates.

NIRS2 Supreme

Norma Evans (TC 1973) is another lady who couldn’t remember having signed a married woman’s reduced rate election in 1974. She did not dispute that she had subsequently paid at the reduced rate. The effect was a delay before the election expired through the post-1978 ‘two-year test’ and some lost years of Home Responsibilities Protection. The Tribunal did not doubt E’s evidence, but her memory was not able to displace the official records, made contemporaneously.

Car Benefit on Part-Owned Car

In G R Solutions Ltd (TC 1928), the director bought a car. Subsequently, he sold a 90% share to the company. He paid 10% of all fuel and other costs. It was contended that no car benefit or fuel benefit was due as the private motoring was done in the privately owned asset. The Tribunal dismissed this argument as on any private journey, the company was providing 90% of it.

Furthermore, as to the fuel benefit only 10% was made good to the company – not the full amount of the actual private usage required to extinguish the charge.

The case was the reverse of Christensen (HMIT) v Vasili ([2004] EWHC 476 (Ch)) where the employer sold a 10% share of a car to the employee to whom it was provided. Either way, the result is the same.

Tip of the Month - Faster Payments

I’ve commented about ‘Faster Payments’ in some previous years, but as of last December HM Revenue and Customs was at last forced to join the club and we can therefore now make payments to HMRC so that, in many cases, they are received on the same day as the payment leaves our account.

The following comments relate to the Class 1A payments for 2011/12 liability, due on 19 July 2012 if paid by cheque, etc., but not until 22 July 2012 if paid electronically – but the principle applies equally to monthly or quarterly payments of PAYE and Class 1 NIC.

The 2011/12 Class 1A due date for electronic payments this year falls on a Sunday, so payment must be received by HMRC by the previous Friday – 20 July. Or must it? In fact, the Faster Payments system works at weekends and “most” (whatever that means) bank holidays. So you could set up a Faster Payment in advance to leave your account on Sunday 22 July and HMRC will receive value that day.

Beware, though, that your payment really is a Faster Payment as you might still be choosing to use what is now old fashioned BACS or if your due amount exceeds your own bank’s limit for Faster Payments it will default back to a slower payment cycle. If relying on the payment actually being received on a Saturday or (in this example) a Sunday you must be certain of your payments systems and your own bank’s limits.

The above is taken from 'NIC Newsletter' (01/06/2012), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.