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Peter Arrowsmith, FCA, looks at some of the recent National Insurance developments and provides some helpful advice for employers who deal with teachers, lecturers and instructions.

EC Regulations and Switzerland

With effect from 1 April 2012, EC Reg 883/2004 has been extended to cover Switzerland. The formal decision was taken only on 31 March and not published by the European authorities until 13 April. The new rules that have applied to the full EU Member States since 1 May 2010 now therefore apply equally in the case of Switzerland.

It is still not known when the same will apply to those EEA Members who are not already full EU Members.

Discounted Options Scheme

Aberdeen Asset Management Plc (AAM) lost at the First-Tier Tribunal in respect of an avoidance scheme involving an employee benefit trust and dividend payments (TC 779) – see my NIC Update -January 2011

The Upper Tribunal has endorsed that decision in Aberdeen Asset Management Plc v HMRC ([2012] UKUT 43 (TCC)) and confirmed that the payments were PAYE-able as readily convertible assets – something which AAM had denied after the FTT decision.

Limitation Act Helps Accountants

Integral Memory Plc v Haines Watts ([2012] EWCH 342 (Ch)) is a case where the client failed to establish a right of proceedings due to the Limitation Act 1980. The advice in question related to a National Insurance avoidance scheme marketed in 1997 and 1998 and perhaps rather perversely, since a similar argument has come up in dealings with HMRC in such matters, the case was lost as the cause of action was time-spent under the Act.

Fuel Was for Private Use

Time For Group Ltd v HMRC (TC 1909) was about a demand for Class 1A NIC on car fuel. The company maintained that only fuel for business use was supplied. That business use included travel to children’s football matches where one or both parents would network for the company.

Similarly, there was a trip to a Scottish lodge when they had invited two existing customers to stay with them and polo matches where networking took place. The Tribunal perhaps not surprisingly held that the business element was incidental to the primary private-use purpose of the trips and that Class 1A was due on the relevant fuel scale charges for the vehicles involved.

Married Woman’s Reduced Rate Election

Norma Reynolds v HMRC (TC 1891) is another case where an individual was unable to successfully dispute HMRC written records from mere memory. R now lived in Canada and amongst other things said that she had never claimed any state benefits – the records showed otherwise, despite the names of employers she stated being correct, but incomplete. To the judge this merely proved that her memory of what happened over 40 years could not displace the authorities’ physical and contemporaneous records.

No Statutory Sick Pay

In Penelope Ann Spence v HMRC (TC 1908), S argued that late payments by the employer had debarred her from entitlement to SSP unfairly. A similar case – Linda Seaton v HMRC, TC 564 – eventually resulted in a favourable outcome for the claimant, but not here as the correction fell within the eight week period over which earnings were to be measured and so counter-balanced.

Tip of the Month - NIC for Teachers, Lecturers and Instructors

Employers involved in the world of teachers, lecturers and instructors CAN relax, despite any impressions to the contrary. As I have reported previously, the provision in the Categorisation of Earners Regulations 1978 relating to such activities WAS repealed with effect from 6 April 2012.

Provided such activities are genuinely self-employed for tax under common law principles there is therefore no longer any Class 1 NIC liability.

You would not think this to read the HMRC Employer Further Guide to PAYE and NICs (CWG2) which says on page 5 (that’s the page numbered 5, not the fifth page of the pdf) that teachers, lecturers and instructors are still subject to the Categorisation Regulations, despite the booklet being amended on 26 March (AFTER the amending Regulations were issued). Indeed, there is no reason why it should have been mentioned in the original version of CWG2 at all as the policy change was announced last autumn.

Am I the only one here left with the feeling that HMRC is happy that employers pay money to it that it has no legal entitlement to collect?

The above is taken from 'NIC Newsletter' (01/05/2012), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.