Hornbeam Highlights 29

National Insurance and State Pensions

The statistics with regard to the National Insurance system are a nightmare, per a recent training course which we attended, each year about 2 million NI payments go unallocated. Overall there are now over 100 million contributions held in suspense accounts. As most people throw away records more than six years old, it can be very difficult to prove that you made contributions ten years ago which the department failed to allocate.

We therefore recommend that our clients obtain a projection of their state pension entitlement and check whether their full contributions are recorded. You can do this yourself by looking on the website or by phoning 0845 3000 168. Or of course we can help you.

National Insurance and High Earners

Another ‘issue’ with National Insurance is that there is no automatic mechanism by which higher earners with more than one source of income receive repayment of overpaid NI. If you think this may have affected you please ask us to check – and recover the overpaid amount.

Employers and National Insurance

Until now most employers have been very lax in checking that they have the correct NI number for their employees. HMRC think that this might be a major factor in the two million contributions which fail to match up. Furthermore government have a major campaign to identify and prevent illegal working (by persons who have no right to work in the UK). It is a CRIMINAL offence to employ someone who has no right to work in the UK. Therefore there is a major campaign building to start prosecuting non-compliant employers. We intend to check that all the NI numbers operated by our payroll clients are correct and advise any of you operating your own payrolls to do the same.

Another End of Tax Year

Many Accountants and Financial Advisers provide their clients with lists of entitlements and allowances to be used up by the end of the tax year. We tend to think that our clients either know or are not interested. But just in case here are the main things you should make sure you are using up:

1. Personal allowances for self, spouse, children - £5035 Income tax, (plus £8,800 capital gains)
2. Contributions to ISA’s, Pensions, Venture Capital Trusts and other tax efficient investments which have annual limits of; up to £7,000: 100% of earnings: £200,000 respectively
3. There are various gifts free of Inheritance Tax allowed each year

Offers

Last months offers resulted in some interesting responses, amongst which were:

1. Jeffery Pellin wants me to remind you that his free DIY internet site deal is still available. We took him up on it to create the new CIS scheme website. It took James about two days to get a very professional, commercial, site up and running
2. Our clients Paul and Judith Fynn wrote in to remind us their daughter Tara Fynn, is representing Great Britain in the skiing in Slovenia in February (sorry that has already happened, but some of you sports fans may have seen her). Tara is in need of sponsorship if anyone has an Anglo-Swiss connection they would like to promote. Paul and Judith are amongst the expatriate community whose UK tax affairs Nicky deals with in quite large numbers
3. Jenny and James Gilheany wrote to ask if I would mention their ‘wordsmith’ services. Both the Gilheany’s were long established journalists on the ECN staff, but now offer their services to write or rewrite original literature, news sheets, magazines on background or projects. They have very reasonable fees and can be contacted on 01603 630615

The Construction Industry

We recently wrote to all of our construction industry clients with our take, and advice on the imminent changes. If we missed you please ask for a leaflet. One further issue has come to our attention through the accountancy trade press.

Whereas tax inspectors have always been fairly relaxed about looking backwards if they persuade ‘employers’ to fall into line and deduct full PAYE from ‘dubious’ subcontractors, HMRC have a new policy. If the employer has treated an employee as a subcontractor (and failed to pay over the correct PAYE and NI) inspectors are now instructed to look back six years and to charge interest and penalties. We predict that this is going to result in some pretty bitter disputes.

Tax Free Perks

PAYE and NI on employment is extremely expensive, it is therefore important as an employer or as an employee to make sure you are taking maximum advantage of tax free perks. We have recently updated the list of such perks on our website. Some important ones such as home use of computer hardware have been withdrawn, however mileage allowances (plus 5p per passenger), car parking, canteen meals, mobile phones, and annual parties (up to £150 per head) remain allowable.

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