Is Employee NI due on LC

[webberg]

No. There is no assessment. It is just a normal RTI payroll obligation. So the employer has to operate PAYE / NIC proactively rather than wait for HMRC to tell it to do so.

I would agree that I used "assessment" to imply that a liability falls upon the employer, rather than delve into the details of RTI. The effect is the same.

No. That is not right. Paragraphs 1(1) and 1(2) Schedule 11 Finance (No 2) Act 2017 treats a relevant step as taking place on 5 April 2019. It is deemed relevant step that creates the employment income tax charge and the NIC earnings then follows that. When the actual loan was made is not relevant for the April 2019 loan charge.

I disagree that "NIC earnings then follows that". The loans being taxed via the loan charge are treated as income in 2018/19. I see nothing that says that they are "earnings for NIC purposes". As such I consider there to be a cogent argument that the NIC liability - if any - can arise only when - or if - HMRC makes good its oft mentioned claim that the loans were earnings in the year paid. Perhaps if they stopped throwing up obstacles and allowed some cases to go ahead, we would have an answer sooner rather than later.


It might be worth looking at s23E(1) which says "... the amount is to be treated ... as profits of the relevant trade". So I'd suggest that is a strong indication that the answer is "yes".



Er, no. Paragraphs 1(1) and 1(2) Schedule 12 Finance (No 2) Act 2017 says that the relevant benefit is treated as being made on 5 April 2019. This means that it is taxable in 2018/19 (and NIC is based on the too). The fact that the loan was made before 6 April 2017 is not relevant. And just because s23E says it is "for" a different tax year doesn't change it being assessed in 2018/19.

I disgaree - see above. You mention that section 23E and Schedule 12 have different views of which year is taxable. I think this is the tip of an illogical situation that HMRC has created by wishing to give the law retrospective effect which hiding behind semantics on retrospection. If so, a lacunae so created would be an ironic victory for taxpayers.

Out of interest, there is still no HMRC guidance on self-employed DR.



No, there is no cap on the NIC in 2018/19. However, if you are old (i.e. have reached state pension age) then no employee's NIC is due. The rule for class 4 NIC is slightly different but can be googled.

For the moment I'll take your word for this - not being an NIC expert. If this is the case however presumably the change is recent as I recall claiming a NIC refund for clients in 2016/17?

As the first of the alleged experts to have dipped a toe in this question, I'm pleased to have kicked the debate off.

Clearly other experts have different interpretations and it would therefore be sensible if they all contributed, rather than holding back and then attempting to score points?

[webberg]

______________


Interesting thanks, I am interested in employment schemes (e.g. EBTs) where employer no longer exists but I was trying not to be so specific soas all could benefit from the view.
What are your thoughts on the below which is why some claim there is no employee NIC due on LC for those in employment schemes (e.g. EBTs) where the employer no longer exists (see full link below). Class 1 NICs is both employer and employee NICs so do we assume from the below neither applies under this scenario?

Tackling disguised remuneration - GOV.UK

Dissolved employer
As the third party in a DR scheme exists independently from the employer, it is possible for a Part 7A charge to arise where the employer has been dissolved or no longer exists. Sections 7, 8 and 9 of the Taxes Management Act 1970, set out the employee’s responsibility to return the employment income to HMRC by making a self-assessment return. As a result the employee is responsible for reporting the income and paying the tax to HMRC. The employee will not be liable for any Class 1 NICs due.

About the only part of the HMRC statement I would agree with is the final sentence.

[Iliketax]

I disagree that "NIC earnings then follows that". The loans being taxed via the loan charge are treated as income in 2018/19. I see nothing that says that they are "earnings for NIC purposes".

You might want to have a look at regulation 22B (and take care reading 22B(3A) if you have a dodgy heart as I guess you won't like that particular bit).

I disgaree - see above. You mention that section 23E and Schedule 12 have different views of which year is taxable. I think this is the tip of an illogical situation that HMRC has created by wishing to give the law retrospective effect which hiding behind semantics on retrospection. If so, a lacunae so created would be an ironic victory for taxpayers.

For self-employed you have to look at s15 SSCBA 1992.

No, I didn't say that they have different views as to which year is taxable. It is taxable in 2018/19 but "for" the last tax year of trading. They mean different things. This is similar to (but different from) s554Z4 for employees.

If this is the case however presumably the change is recent as I recall claiming a NIC refund for clients in 2016/17?

No, primary class 1 and class 4 NIC's have been uncapped since 2003/04. You may be thinking of a refund for NIC paid between the PT and UEL where someone has more than one employment. Or you may be thinking of something else.

[passerby]

How about if the loans were more than 6 years old. Would NI be due with the loan charge?

[webberg]

No, primary class 1 and class 4 NIC's have been uncapped since 2003/04. You may be thinking of a refund for NIC paid between the PT and UEL where someone has more than one employment. Or you may be thinking of something else.

No, I think not.

I had a client who was employed and had a self employment.

His total NIC was over a limit in 16/17 and I recall his bank account being credited with more than £7k in refund.

[starstruck]

I'm confused, I thought LC didn't include NI. No adviser has told me that.

But just seen this ... The Social Security (Contributions) (Amendment) Regulations 2019

Have they literally just added it?!

Do I now need to add NI to my LC calcs? (Employment Based Scheme, 2001-2004, Employer gone)

[starstruck]

Bump

[ric_77]

i was told that because i was classed as 'self employed' by my scheme provider (not Ltd) so NI was indeed due as part of settlement. Id not even contemplated challenging this until this thread (i dont currently have a tax advisor)

[starstruck]

i was told that because i was classed as 'self employed' by my scheme provider (not Ltd) so NI was indeed due as part of settlement. Id not even contemplated challenging this until this thread (i dont currently have a tax advisor)

Not sure about settlement when "self-employed". but I thought the Loan Charge didn't include NI for emloyment/contractor schemes where the employer is gone and the loans are > decade old. Can any of the experts comment?

[Hitchphil]

Not sure about settlement when "self-employed". but I thought the Loan Charge didn't include NI for emloyment/contractor schemes where the employer is gone and the loans are > decade old. Can any of the experts comment?

My advice said as an X employee of a now defunct Ltd Co, settlement will include employees NI at the rate due at that time (12%) & not employers NI. So the effective rate for my tax years is 32% + HMRC interest = ouch!

My arrangement was Umbrella Co contracted my services to a 2nd party Ltd Co who paid me a salary & paid my PAYE NI/ENI & under that arrangement I paid 2x as much PAYE & NI as I was paying previously under dividends & NatMinWage. The balance of contract revenues went to trustees & they made EBTs to me (less a fee).

Both my Umbrella & Employer co were closed down pre 2015. My trustees still exist.