PART 3: NATIONAL INSURANCE
EMPLOYMENT OF VETERANS From 6th April 2021 employers will be exempt from the secondary NIC, employers, when they employee a forces veteran. More details are expected in advance of implementation but this is expected to be for the first year of the veteran’s employment. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS HOLIDAY PAY IN ADVANCE For NICs purposes: • divide the payment into its separate weekly/monthly components and calculate NICs for each week/month separately, or • calculate NICs on the whole sum by dividing the payment by the number of weeks/months covered. This method may be used for employees whose pay intervals are multiples of a week but not where the exact percentage method for calculating NICs is used; neither may it be applied to monthly pay calculations. For tax treatment see PART 2 . HOLIDAY PAY SCHEMES/HOLIDAY PAY STAMP FUND Historically in some industries, principally in the building sector, an employer contributed to a holiday fund by the purchase of stamps through a holiday scheme. The current employer, when paying the employee holiday pay and operating PAYE in the normal manner, reclaimed the payment from the scheme by cashing in the stamps. This allowed workers with transient employments to receive holiday pay without the cost burden falling upon the current employer. From the early 1960s holiday payments treated in this manner have been exempt from NICs. The exemption was withdrawn on 30th October 2007 for all businesses outside those deemed to be construction operations for whom the scheme was withdrawn on 30th October 2012. The effect of the withdrawal was to bring such payments into Class 1 NICs liability. The exemption was withdrawn because non-construction businesses had taken advantage of the loose wording of the legislation and had set up schemes in order to make huge savings on employer NICs on the payment of holiday pay. HOLIDAY CREDIT SCHEME In a ‘holiday credit’ scheme, an employer sets aside money each pay day to pay the employee in a lump sum when taking a holiday. Where an employee has the right to the money at any time then liability for NICs is at the time the credit is laid aside and is deemed to have been ‘paid’. Where the employee has no entitlement to the money until holiday is taken then NICs will be due at that time. No printing, copying or reproduction permitted. MAXIMUM ANNUAL CONTRIBUTION THRESHOLD An employed earner’s total NICs contributions in any year are subject to an annual ‘maxima’. Prior to 6th April 2003 it was the equivalent of the weekly table “A” × 53. From April 2003, in
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