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Peter Arrowsmith FCA outlines a selection of NIC matters, and offers a tip in connection with the payment of Class 3 National Insurance contributions.  

New Disclosure Opportunity (NDO)

The NDO was launched on 1 September carrying a restricted penalty of 10% in most cases and is mainly concerned with 'proper' taxes, etc., in respect of offshore accounts and offshore assets. However, there will be NIC to include in the case of employer liabilities and profits of the self-employed. Intention to disclose must be made by 30 November 2009 and actual disclosure (with payment) must be made by 31 January 2010 on paper or by 12 March 2010 online. Two booklets and some FAQs can be found at New Disclosure Opportunity (NDO). FAQ48 points out that there is no statutory obligation to pay Class 1 or Class 1A NIC for years prior to 2004/05, but rather pleadingly adds that they can be paid on a voluntary basis.

There is a separate facility for disclosures involving Liechtenstein with an overall time limit of 31 March 2015 (yes, FIFTEEN) (see Liechtenstein Disclosure Facility (LDF).

Changes to NIC Credits Next Year

Ahead of the reduction in the number of qualifying years needed for pension purposes next April and the phased rise in the state pension age for women, the Social Security (State Pension and National Insurance Credits) Regulations 2009 (SI 2009/2206) make a number of changes effective from that time which include the following:

• The accrual rate of Graduated Pension for women will be equalised with that of men,
• A phased withdrawal of autocredits (the automatic grant of credits to men aged 60-64 inclusive).

With regard to the latter, it had been planned to extend autocredits to women from 2010. However, since that original plan was formulated, the reduction in necessary qualifying years to 30 has been enacted. As there is therefore less need for these credits, they will only be available to men who are over what their state pension age would be if they were a woman. Thus the autocredits will cease altogether from April 2020 when equalisation is achieved.

Preliminary Hearing Refused

In Blue v HMRC (TC109), the employer appealed against two Notices of Decision (to the employer and to an employee benefit trust) that Class 1 contributions were due on the exercise of share options. The options had been granted by an employee benefit trust and the employer applied for a preliminary hearing to determine who was the secondary contributor.

The judge dismissed the application, noting that the ten conditions that the judiciary consider in determining whether to have a preliminary hearing were not met.

Registration as Newly Self-Employed

Due to various attempts to defraud HM Revenue and Customs, it is no longer possible to register as self-employed online without a valid National Insurance Number.

Tip of the month - September 2009

Some people - mainly women - are currently considering whether to pay Class 3 (voluntary) contributions for historic years under the new provisions that came into effect on 6 April 2009. This enables contributions to be paid for up to ANY six years from 1975/76 - albeit at the current more expensive rate (2009/10 - £12.05 per week). Despite the expense, such payments can be beneficial in some cases.

Before paying, it is important to be certain of the complete past contribution record and details can be obtained by writing to:

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

or by telephoning the National Insurance Enquiry Helpline on 08459 155996. In either case the request to be made is for a statement of the individual's National Insurance Account and I strongly recommend that a specific request be made that Home Responsibilities Protection (HRP) years are clearly specified in the report provided in reply.

I have seen one such report which omitted the years of HRP earned (typically in respect of years for which Child Benefit was being paid).

In that case it looked as though a payment covering six years (around £3,500 in the particular case) was going to generate extra pension of nearly £600 per year, but on examination - and because of the HRP - would in fact generate extra pension of less than £100 per year. Quite a different proposition!

I have no idea whether this is a deliberate attempt on the part of HM Revenue and Customs to procure the payment of unnecessary contributions (which couldn't later be refunded as actual payments, like actual credits, simply displace HRP) or simply stems from a lack of thought.

Either way, where anyone is in any doubt as to the position it is essential that they seek advice in cases of this kind before they or their clients write a large cheque to HM Revenue and Customs.

The above comments relate to people who reach state pension age before 6 April 2010. Others will have their HRP converted to actual credits - the precise basis is yet to be publicised. But it may be sensible for those people to wait until much nearer to (or even after) 6 April 2010 before making a decision and any payments - even though in some cases we would then be looking at an even higher Class 3 rate for 2010/11, though currently expected to increase only modestly from the present rate.

The above is taken from 'NIC Newsletter' (07/09/2009), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.