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Peter Arrowsmith FCA outlines a selection of NIC matters, and warns employers that they may be receiving requests by HMRC for the correct National Insurance numbers for their employees.

The Budget

Motor Cars

The rates for 2011/12 have been announced in that the CO₂ bands will drop by a further 5 gramms, i.e., the lower threshold will be reduced from the current 130g/km to 125g/km. At the same time all discounts will be abolished though the current net 9% charge for electric vehicles will remain, by the main rate itself for such vehicles being reduced from the current 15% to 9%.

Another key change, from the same time, is that the current £80,000 cap on the price of a car will also be abolished. This will impact particularly on 'classic cars' where a market value is used in lieu of the list price.

All these changes will of course flow through to the employer's Class 1A charge.

Avoidance

Some have been trying to avoid or reduce the tax and Class 1A charge on living accommodation by paying a high up-front lease premium with only nominal rent thereafter. A Finance Act 2009 change will ensure that, where there is a lease premium paid for a lease of ten years or less, both liabilities ensue as if the normal commercial rent had been paid.

This rule will not apply to properties used mainly for a business purpose but also partly for the domestic use of an employee (or, presumably, more than one employee).

Late Payment

From April 2010 penalties will be applied for the first time to all sizes of employers who are late in making in-year (i.e., monthly/quarterly) PAYE/NIC remittances.

The amount of the penalty will depend on the number of defaults in any 12 month period. There will be no penalty for the first default. Other defaults will attract a penalty starting at 2% and rising to 5% of the tax, etc., unpaid. There will be further penalties of 5% of any amounts still unpaid at 6 and 12 months after the end of the year but these penalties will not be charged during an agreed 'time to pay' arrangement (unless the taxpayer defaults or "misuses" the arrangement).

Interest

Rates are to be harmonised across all HM Revenue and Customs duties and will in future take effect automatically 13 days after a Bank of England base rate change.

Business Payment Support Service

This is being extended to allow expected losses for a year not yet ended, to be taken into account in a 'time to pay' arrangement on business profits. The loss relief may not, however, be taken into account in respect of PAYE/NIC liabilities.

Caring Grandparents (Is there any other sort?)

A comment was made in the Budget speech that grandparents of working age who stay at home to provide childminding of their grandchildren will have their state pension position protected.

DWP has since confirmed that this means that Home Responsibilities Protection will be extended to cover this circumstance but no start date has yet been indicated.

Since from 6 April 2010, only 30 qualifying years will be needed for full state pension entitlement, this seemingly generous proposal will, however, probably cost the State virtually nothing.

The NIC credit for working age people who care for their grandchildren will commence in April 2011.

Other news

Low Earnings Threshold - Correction

The Social Security Pensions (Low Earnings Threshold) Order 2009 (SI 2009/610) that I reported earlier this year, sets the lower and higher thresholds at £13,900 and £31,800 respectively and not at the figures stated previously.

I apologise for this error - the discrepancy is due to the fact that the Government Actuary was evidently misinformed or himself miscalculated the figures before the Statutory Instrument was finalised.

Teachers and Trainers

Trainers, lecturers and instructors are subject to the Categorisation of Earners Regs 1978 which very often have the result that what is a genuine self-employment for tax purposes is treated as an employment for National Insurance such that Class 1 contributions are therefore payable.

In Revenue and Customs Brief 25/09, HMRC has announced a forthcoming consultation on the matter along with a temporarily revised page in the Employment Status Manual (ESM4503). This all seems to have been prompted by resistance from, in particular, providers of First Aid training who - says HMRC - cause any premises that they enter (e.g., visiting Tesco to train the staff) to become an 'educational establishment' for the duration.

Equalisation of State Pension Age

Women born between 6 April 1950 and 5 April 1955 will have a pension age higher than 60 as the harmonisation with the male pension age phases in over the years 2010 to 2020. The Pension Service will be writing to all women born between those dates stating their own precise date on which pension age is reached and enclosing an information leaflet. These letters will be issued quarterly from April 2009 until January 2012 - those reaching pension age earliest being contacted first.

Deferment Applications

Application forms (CA72A and CA72B) for new cases can now be downloaded from the HM Revenue & Customs website at Deferment of National Insurance Contributions

Further Class 3 Payments from 1975/76

The Pensions Act 2008 procedure enabling historic years Class 3 to be paid (at the current rate of £12.05 per week, however) is now in place and two useful and short guides are available at How To Increase Your State Pension

The guides rightly make clear that such payments will not be appropriate for everyone. In particular the displacement of means-tested benefits, the replacement of future non-taxable benefit income with taxable state pension and possible entitlements on spouse's contributions will need to be considered on a case by case basis.

As well as the traditional state pension forecast route by phone, web and postal application (which is only available up to four months before state pension age is reached), it is now possible to get a state pension forecast by phone on 08453 000168 (and textphone 08453 000169) up to 30 days before state pension age is reached - but not by web or postal application.

Alternatively, according to Stephen Timms no less, any individual can write to:

HM Revenue and Customs
National Insurance Contributions Office
Longbenton
Newcastle upon Tyne
NE98 1ZZ

or telephone the National Insurance Enquiry Helpline on 08459 155996 and ask for a statement of their National Insurance account. This will show all of the years on the individual's National Insurance record and the amounts of National Insurance paid each year. The statement will also identify any years which are not qualifying years because no contributions, or insufficient contributions, have been paid and whether voluntary contributions can still be paid for any years.

Tip of the Month - May 2009

A transfer of tax records from HM Revenue and Customs' ten separate regional PAYE databases to the NIRS2 NIC computer is imminent. This will enable all of a person's employments (whether concurrent or consecutive) to be accessed by tax staff on the one screen, rather than records being held on an employer-by-employer basis as has been the case up to now.

So what's this got to do with National Insurance contributions - apart from the fact that HMRC is very bravely using the same NIRS2 computer that caused so many problems and delays for so many years in the latter part of the 1990s?

Simply that leading up to the transfer, HMRC has been tidying up its records - including National Insurance Numbers (NINOs). Where employers have been using incorrect NINOs, notifications of the correct number will be issued to them on form P46-5T (one for each affected employee) and the individuals will be notified on form P217.

HMRC accepts that if an employer receives a large number of such notifications (which will be on paper) all at once it may take some time to process them all, but simply asks that employers do so as soon as they are able and in any event by the end of the current tax year.

The above is taken from 'NIC Newsletter' (01/05/2009), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.