Enter Your E-mail

Peter Arrowsmith FCA highlights a selection of NIC matters, and offers a tip for employers based in the UK and other EU countries who send workers abroad in certain circumstances.

Pension Age to Reach 66 by 2020

In the Spending Review on 20 October, the Chancellor announced that the State Pension Age (SPA) will rise for both men and women to 66 by 2010.

At present, the SPA for women is due to reach only 65 by 2020 and the increase to 66 for both sexes was scheduled to take place from 2024-26.

Instead, the SPA for women - which will have reached 63 by 2016 - will rise by three years rather than the planned two over the four year period to 2020 and that for men will start to rise in parallel over the period from December 2018 to April 2020.

It is not yet clear whether the further (and already legislated) rises in SPA to 67 and then to 68 will be accelerated.

As is the case already for women who reached 60 after 5 April 2010, any extended SPA will mean that NIC is paid for a longer period up to the newly specified pension age.

NI Credits Changes - Consultation

The Department for Work and Pensions is consulting on changes to National Insurance credits. You probably won't recall that in the 2009 Budget it was announced that what was then Home Responsibilities Protection (carer's credits as of April 2010) would be extended to grandparents.

This extension, which may also include other family members, is proposed to commence from 6 April 2011 and would be subject to a claim and checking by the authorities that the recipient of Child Benefit for the child already has a qualifying year by virtue of earnings, contributions or other credits. Thus the carer's credit will be removed from the Child Benefit claimant to the claimant of carer's credit. There would be no time limit for such applications.

An extra change is to remove - from 6 April 2010 (TEN) - the award of credits for the tax year in which people reach the ages of 16, 17 and 18. Given that it is now possible to attain 100% state pension entitlement with only 30 qualifying years and that the old 25% minimum also no longer applies these credits are arguably unnecessary. Further there is a concern that people arriving in the UK, even for only a short time, have a right to these credits which under the new 30-year rule would give a 10% state pension entitlement to certain foreigners for no actual payment of contributions.

The consultation document (which includes details of how to send in comments - due by 26 November) is available at National Insurance credit changes - public consultation

Failed Avoidance Scheme

Twice over, in fact.

The case of Uniplex (UK) Ltd v HMRC Commissioners (TC698) involved an attempt to replace taxable and NIC-able earnings with dividends.

First, a scheme involving the use of a discretionary trust had not, in fact, been implemented as no trust was ever set up. An alternative plan involving a further company into which 90% of the employer's profits would be paid for distribution to those employees who had chosen to participate (and who otherwise were paid only the National Minimum Wage) was also held not to be effective, not least because company resolutions had not been filed at Companies House until about a year later, calling into question the bona fides of minutes and meetings, and because the profit paid over did not amount to as much as the agreed 90%, being only around 50%.

The scheme was sold to Uniplex by a Mr Backhouse (who appeared before the Tribunal) and who the Tribunal was in a position to observe had operated through a number of legal entities and sold schemes to at least 90 employers. It is, naturally, not known whether these other schemes were implemented correctly.

Class 2 NIC Changes

I mentioned last month moves to change payment dates for self-employed contributions. I observe that, in fact, no notices about this have been included with the October quarterly bills as had been expected.

Easier EU Applications Online for the A1 Certificate

It is now easier to apply for A1 (formerly E101) certificates online. It will no longer be necessary to log in to the 'Do it online' service.

Application will instead be by a secure form and there will be no need to register in advance. To access this go to Residency - Contacting HMRC Electronically and scroll down to 'Employers - Apply for E101 (sic) online'.

This new service was stated to be available from 11 November 2010, but seems to have been operational from early October.

Bad Workman Blames his Tools?

HM Revenue and Customs has issued the 'Expenses and Benefits from Employment Toolkit'. This first edition is for 2010/11 P11D completion and we are assured that it will be updated annually. It can be found at Toolkits to Reduce Errors

Though probably essential reading for anyone involved with benefits, expenses and P11Ds - to say nothing of Class 1A NIC - it is not particularly comprehensive. And do not be misled by the stated amount of the 2010/11 van private fuel benefit. You think it's £550 now, I think it's £550, but HMRC still thinks (incorrectly) that it's £550.

Tip of the Month - November 2010

In some circumstances it has in the past been possible, when sending workers to another EC/EEA Member state, for Employer's National Insurance liability to fall away completely so that only employee's contributions were due in one country or another. For instance, a Belgian employer sends say just one employee to the UK for 18 months to widen the employer's reach in the UK market. The Belgian company has no place of business in the UK (a house is rented for the employee), there is no parent company, subsidiary or associate in the UK that is treated as a 'host employer' and for whatever reason an application under the old Article 17 to retain liability in Belgium either was not made or was refused. UK contributions were due from the outset as the secondment was for more than the old basic time stipulation of twelve months, but only employee NIC was due prior to 1 May 2010.

Under the new EC Regs 883/2004 that apply from 1 May 2010, debts can now be pursued cross-frontier and in cases such as this the Belgian employer needs to set up a UK PAYE Scheme to account only for NIC (which will now also include the employee portion that the employee will or should previously have been paying personally). This is difficult as HM Revenue and Customs staff are apt to be suspicious of foreigners trying to set up PAYE Schemes. Applicants will need to stress that this is required under new EC Reg 883/2004.

UK employers sending workers abroad in circumstances where the liability does not remain in the UK and employer liability abroad could not be enforced prior to 1 May 2010 will similarly need to set up schemes abroad to account for the appropriate European country's NIC.

The above is taken from 'NIC Newsletter' (01/11/2010), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.