NIC update July 2009

No sign of IR35 this time!


Wright v HMRC Commissioners (TC32)(http://tinyurl.com/lakeqa ) is an employment status case that, for once, does not involve the intermediaries' legislation. The workers of a subcontractor groundworker were ultimately held to be employees of that subcontractor.

The General Commissioners had held them to be self-employed, but that decision was overturned on HMRC's appeal to the High Court, though the case was then remitted back to consider whether the 'employer' in fact had effective control of what had been held to be employees. By the appellants' own admission, they took on staff casually and with little experience of the work they were to perform and even taking a step back and applying the principles in the 1968 Ready Mixed Concrete case, the workers could not be considered to be anything other than employees.

IR35 not doing its job


The Professional Contractors Group (PCG) has obtained, under a Freedom of Information Act request, details of the revenue obtained through the application of the IR35 rules. In the years 2002/03 to 2007/08 inclusive receipts were £9.2 million, an average of £1.5 million per annum.

The PCG is to be congratulated on obtaining this information, as when MPs have in the past put down Written Questions the HM Revenue and Customs reply has been that the information is not collected. Such a reply was given again as recently as 10 June 2009.

The answer does not and cannot, however, reveal the extent to which the fact that the legislation is in existence means that contracts have been structured more traditionally, such that standard PAYE/NIC receipts are obtained and are thus hidden within a large population.

State pension age changes and contracting-out


Although state pension ages are increasing for women from next April (and for both men AND women from 2024), the age at which Guaranteed Minimum Pension is payable remains at 60 for women and 65 for men. The Contracted-out Deduction will be based on the GMP at these respective ages, plus any inflation proofing up to the new state pension age.

Contracted-out rebates to Contracted-out Money Purchase schemes and to Appropriate Personal Pensions will, however, be payable up to and including the tax year prior to the one in which the actual state pension age is reached.

State pension age changes and other benefits


The Social Security (Equalisation of State Pension Age) Regulations 2009, SI 2009/1488, amend with effect from 6 April 2010 various qualifying and disqualifying dates for various contributory and non-contributory benefits, to reflect the rise in state pension age for women. In addition, the age from which men can obtain non means tested Winter Fuel Payment will also rise from the present qualifying age of 60.

Tip of the Month - July 2009


We ordinarily think in terms of the annual maximum for NIC as only applying to people who have more than one job at the same time, or are both employed and self-employed. However, in some circumstances it will apply to someone who leaves their only job and starts a new (sole) employment. Suppose they leave mid-month and are paid monthly in both the old and the new jobs. A full month's limits and thresholds will apply to the final (part month's) payment from the old employer and a full month's limits and thresholds will apply to the first (part month's) payment from the new employer. If the earnings are sufficiently high so that the Upper Earnings Limit (UEL) is reached in each employment in the month of the change, then 13 months' maximum NIC will have been paid. The deferment opportunity is rarely spotted in time in these circumstances so a refund claim after the end of the year will be needed. (Note - even if the UEL is not reached in both jobs in that month but the two rates of annual pay are above the UEL then some repayment may still be due. It may not always be economic to pursue such smaller amounts, though some will eventually be made automatically.)