Enter Your E-mail

Peter Arrowsmith FCA presents a selection of NIC matters, and highlights a practical tip regarding Statutory Sick Pay and the Employment and SUpport Allowance. 

Another mariner case

Late last year a case involved manipulation of the earnings rules to obtain an NIC reduction where an appropriate pay pattern for a mariner had been in point.

A more sophisticated arrangement was in play in the case of Oleochem (Scotland) Ltd ('O'). Here, O provided offshore laboratory services to the oil and gas industry. Its wholly owned subsidiary (I) was a Jersey-registered company and it supplied O with process chemists to work on clients' floating production storage offload facilities (FPSOs) in the North Sea. I voluntarily accounted for PAYE and primary (employee) contributions but contended that as it had no place of business in the UK there was no liability to employer contributions. HMRC issued 42 notices of decision on the basis that the process chemists were employees of O. O contended before the Special Commissioner in SpC 731 that the chemists were employed by I as a matter of fact; that the general agency rules (Social Security (Categorisation of Earners) Regs 1978, Sch 3, para 2) did not apply to I; that the chemists were members of the crew and that the FPSOs were vessels thus rendering the chemists 'mariners' within the Contributions Regs 2001, Reg 115 so that I fell outside the residence test in Reg 117(1) and that the host employer rules (Social Security (Categorisation of Earners) Regs 1978, Sch 3, para 9) did not apply to mariners. Further, the effect of the 2003 amendment which referred to the carrying on of duties in category A, B, C or D waters was to restrict the liability to mariners working in essentially inland waters.

The Commissioner agreed that the chemists were mariners, that they were employed by I and that the FPSOs were vessels. He also agreed with the defendants as to the application of Social Security (Categorisation of Earners) Regs 1978 - in particular that the 2003 amendment to the legislation did not change the position of mariners working outside territorial waters.

More on the new Appeals Tribunal

The National Insurance Contributions (Application of Part 7 of the Finance Act 2004) (Amendment) Regulations 2009 (SI 2009/208) make further changes in respect of the appeals system following the earlier SI mentioned in the previous update. This SI makes changes in the case of certain appeals in respect of the avoidance scheme disclosure procedures and also removes a few provisions that are proper to the Tribunal Procedural Rules instead.

Co-operation between EC Members

The European Commission has adopted two proposals for new Directives which will improve mutual assistance between Member States' tax authorities. Member States will no longer be able to invoke bank secrecy to refuse co-operation and there are also proposals to improve measures regarding mutual assistance in the recovery of taxes. Both these proposals specifically include compulsory social security contributions.

Re-hearing for IR35 case

The General Commissioners have been ordered by the High Court to re-hear the (unreported) case of HMRC v Larkstar - which was originally won by the company. In practice however, it will presumably be heard through the new Tribunal (see details above and last month) rather than by the soon-to-be-abolished General Commissioners.

In the original case the Commissioners failed to consider legal authorities to which HMRC had referred them. Thus, they had not taken all arguments into account.

Memorandum of understanding

Liaison on social security matters has slipped since the Inland Revenue/HM Customs and Excise merger in 2005 so a new Memorandum of Understanding between HM Treasury, HM Revenue and Customs, and the Social Security Advisory Committee confirms that the latter will provide advice both on its own initiative and on the request of the Treasury and/or HM Revenue and Customs. Such advice will be on relevant policy matters and also include specific advice on National Insurance contributions so far as the matters affect contributory benefit entitlement, Child and Working Tax Credit, Child Benefit and Guardians Allowance.

Tip of the Month - March 2009

If you are involved with paying Statutory Sick Pay (SSP) either to your own employees or to clients' employees you need to note that with the replacement of Incapacity Benefit (IB) last October by the Employment and Support Allowance (ESA) the SSP linking period is now twelve weeks in the case of ESA claimants, rather than the eight weeks that still applies to IB claimants. In either case they should present you with a suitable DWP 'linking letter'. Employers will come across either situation for some time as ESA applies initially only to new claimants - IB claimants will be switched over a year or two. The key point for employers is to pay SSP if there is no linking letter - those employers who choose to check with employees where there were only a few weeks of work since a previous absence now need to initiate their query and phrase their question in terms of a twelve week gap, even though for a while a 9-12 week link will be ineffective as regards those employees who had previously received IB rather than the new ESA.

(The linking rule is the rule whereby if the employee was receiving the benefit within the previous specified number of weeks, they would resume that state benefit rather than you having to pay SSP.) It remains the case that in some special circumstances there can be a 104-week linking period. This remains unchanged and will continue to be authorised by a BF220 (or similar) linking letter for IB cases - but for ESA claimants will now become an ESA220 (etc) letter.

The above is taken from 'NIC Newsletter' (02/03/2009), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.