Class 1 Nics - Recovery Of Underpaid Contributions
o if they are not : NICs are paid by each employer on their share of the payment.
3. Employment in two or more jobs with the same employer: • COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS The general rule is that all earnings must be added together for the calculation of NICs. However, where earnings from each job are separately calculated and it is ‘not reasonably practicable’ to do so, it may not be necessary to do so. Employers would be unwise to adopt a policy of separation of earnings as a means to reduce NICs liabilities, as it will be necessary for the employer to establish that to do so is not practicable. Any such decision may be reviewed by HMRC. There is no definitive HMRC definition of ‘not reasonably practicable’. Resolution will generally be determined by case law. Further information on the issue may be obtained from the National Insurance Manual (accessed via the Gov website), or the employer’s tax office. Prior to April 2016, calculations had to be made using contracted out earnings first. Since the abolition of contracting out this is no longer necessary. When working out NICs where earnings from separate jobs are added together and NICs are not due at contracted-out rate in all jobs, NICs should be calculated on the total earnings using the shortest earnings period. N.B. Aggregation applies only to NICs, never to Income Tax! CLASS 1 NICs - RECOVERY OF UNDERPAID CONTRIBUTIONS Provision for recovering underpaid contributions is restricted. Prior to 6th April 2004 an employer could recover underpaid contributions from later earnings periods within the same tax year, subject to a maximum additional deduction in any earnings period not greater than a sum equal to the amount of normal primary contributions due in that period, (the double deduction principle). From 6th April 2004 where an under deduction has been made by the employer acting ‘in good faith’ recovery can made from any payment of earnings in the current and the next tax year subject to the double deduction principle. CLASS 1A NATIONAL INSURANCE Class 1A contributions, introduced 6th April 1991, are levied on the employer (not employees) and were initially charged only on car and fuel benefits at the standard rate of employers’ NIC. Class 1A was extended from 6th April 2000 (first payments due July 2001) to most taxable benefits-in-kind except those: • where Class 1 NICs are due, or • covered by a dispensation, or • included in a PAYE Settlement Agreement (PSA) • provided for employees earning at a rate of less than £8,500 a year, or • otherwise not required to be reported via a P11D return. No printing, copying or reproduction permitted. Other limited exemptions: • exempt minor benefits (see under tax)
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