National Insurance
Class 2 National Insurance will be staying 10 September 2018
Chancellor Philip Hammond has scrapped the Government’s pledge to abolish Class 2 National Insurance contributions (NICs), but still intends to reform the NICs treatment of termination payments and income from sporting testimonials.
The move was laid out in a written ministerial statement by the Exchequer Secretary to the Treasury Robert Jenrick on 6 September 2018:
“The Government is announcing today that it will not proceed with the abolition of Class 2 National Insurance contributions (NICs) during this parliament.
This change was originally intended to simplify the tax system for the self-employed. We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits. We have since engaged with interested parties to explore the issue, and further options for addressing any unintended consequences. A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the State Pension rise substantially. Having listened to those likely to be affected by this change we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society. Furthermore, it has become clear that, to the extent that the Government could address these concerns, the options identified introduce greater complexity to the tax system, undermining the original objective of the policy. The Government remains committed to simplifying the tax system for the self-employed, and will keep this issue under review in the context of the wider tax system and the sustainability of the public finances. The Government still intends to legislate for reforms to the NICs treatment of termination payments and income from sporting testimonials, which were set out in the draft NICs Bill published on 5 December 2016. These are important changes to ensure the NICs treatment is consistent with the treatment of income tax in previous Finance Acts. We will set out further details in due course.”
Back to Contents
Class 1A National Insurance contributions on termination payments 25 September 2018
Following a discussion at HMRC’s Employment and Payroll Group (EPG) meeting on Friday 21 September we now know that the proposed Class 1A National Insurance contributions on termination payments will not be reported through the FPS for 2019-20.
However, it was confirmed that the Government does still intend to impose an employer Class 1A NICs liability on the taxable portion of a termination payment, but Ministers have not yet decided on an implementation date.
Even at this late stage, implementation from April 2019 is still a possibility, but if it is implemented for the 2019-20 tax year it is more likely, at least as an interim arrangement, to be an annual charge reported and payable in July 2020 on a P11D(b) along with other Class 1A NICs liabilities, though we know that in the longer term the Government still intending that payment would be in real time. There is still much to be confirmed, not least because we still don’t have a definite implementation date, but if payroll software is going to help employers keep track of the payments they have made and calculate the Class 1A arising then we need that confirmation quickly.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
Page 360 of 629
Made with FlippingBook - Online magazine maker