NICs and Statutory Payments ToolkitFriday, February 25th, 2011
In recent months, HMRC has begun to provide “toolkits” for tax agents and advisers to help them check that returns are completed correctly, focus on key areas of potential error, and meet the “reasonable care” requirement. A particularly useful toolkit, on Expenses and Benefits from Employment, was issued in October 2010.
One of the latest additions to these toolkits looks at Class 1, 1A and 1B NICs and the various statutory payments. In each case, the potential problem areas are considered and guidance is given on how to mitigate the risks. This toolkit, and the earlier toolkit on expenses and benefits, are particularly useful because they cover the areas that HMRC is most likely to examine in the event of a compliance check.
The major part of the toolkit involves a 23-point checklist and a detailed discussion of the issues for each of the points. To demonstrate how practical this toolkit could also be for employers, we list below all of the 23 key subjects covered.
1. Has the appropriate Class of NICs been operated?
2. Has the correct National Insurance number been provided?
Class 1 NICs
3. Have Class 1 NICs for Directors been calculated using the annual earnings period?
4. Have all relevant earnings of the directors been identified for Class 1 NICs purposes?
5. Has the correct earnings period for calculating employees Class 1 NICs been used?
6. Have any personal bills incurred by directors or employees and paid by the employer been included as earnings for NIC purposes appropriately?
7. If a director or employee has more than one employment either with the same employer or associated businesses have their earnings been aggregated for NIC purposes?
8. If payment of an employee’s primary contributions has been deferred has the employer received the appropriate authorisation?
9. Have NICs been operated on any released or written off employment related loans made to directors or employees?
10. Have all relevant tips, gratuities or service charges been appropriately included as earnings for the purposes of calculating Class 1 NICs liability?
11. If students are employed have NICs been operated on their earnings appropriately?
12. If NICs have not been operated on payments to harvest workers have all necessary conditions been satisfied?
13. Have Class1 NICs been correctly calculated for employees leaving the employment?
Class 1A and 1B NICs
14. Have Class 1A NICs been calculated and paid on all expenses and benefits provided to directors or employees appropriately?
15. Have Class 1A NICs been applied to any beneficial loans made to directors or employees appropriately?
16. If there is a PAYE Settlement Agreement have Class 1B NICs been calculated and paid appropriately?
17. Have all of the qualifying conditions been met for any statutory payments made?
18. Has the correct amount of statutory payments been recovered from HMRC?
19. Have the correct dates and rates been used when calculating Statutory Maternity Pay?
20. When an employee is off work with a pregnancy related illness has her Statutory Maternity Pay and leave started at the correct time?
21. Has any recovery from HMRC been correctly calculated when the business operates an Occupational Maternity Pay or Occupational Sick Pay scheme?
22. Has any pay increase been taken into account when calculating the employees average weekly earnings?
23. Have directors’ earnings been treated correctly for the purposes of calculating their average weekly earnings for statutory payment purposes?