What is National Insurance Contribution Holiday (NIC): A Guide for Employers
If you are eligible for the holiday, you can apply for it retroactively. However, there is no guarantee that you will receive the holiday. You could be denied because you didn’t work for the same employer during the entire qualifying period.
You can also claim for NICs paid up to the end of the tax filing deadline even if you did not take the holiday.
Who can apply
The government has announced it will waive VAT on purchases made during Christmas and New Year’s Eve – meaning you’ll pay no extra taxes on gifts bought over the festive period. This applies to both individuals and businesses, including sole traders, partnerships and property & investment businesses. But there are some exceptions.
You won’t be able to claim the exemption if you’re trading a charity, or if you provide managed services to another organisation. You might also find yourself paying VAT again if you buy goods online, because you’d usually be charged VAT on those items once you’ve delivered them into the UK.
Businesses not considered to be new
There are different types of businesses that don’t fall into the category of “new.” These include companies that do similar things to those that did in the past, such as takeovers, mergers, expansions, incorporations, sales of shares, purchases of shares, and acquisitions.
Many people think that they should consider incorporating a business if there is a change in ownership or management, but this isn’t necessarily true. A business can continue under the same owners without being incorporated.
Business locations
The National Insurance Contributions (NICs) holiday is now open for applications across the UK.
Businesses in Northern Ireland, Scottish Highlands and Islands, Wales and parts of the English East Midlands, North East and North West, South West, Yorkshire & Humberside, and the English East Midlands are eligible.
Most businesses in those areas qualify for the NICs Holiday.
If your business doesn’t fall within one of the areas listed above, you won’t qualify.
If your principal place of business moved from an excluded region to one of the included regions, your claim ends if you don’t meet certain criteria.
If your principal location was already in one of the included regions and you relocate to another excluded area, you won’t be entitled to any further holiday pay.
If you move back into the included region, you’ll lose any previous claims.
Businesses and state aid
The European Union introduced a new policy called de minimis state aid, which allows businesses to receive aid without meeting strict conditions. This includes state support such as grants, loans, subsidies, etc., which are given to small and medium sized enterprises (SMEs).
Anti-avoidance rules
The European Union’s anti-abuse directive requires financial institutions to establish adequate procedures to prevent customers from engaging in abusive tax avoidance schemes. However, there are exceptions to the rule, including transactions involving real estate.
In a recent case, a German bank had to pay €1 million ($1.2 million) to settle charges it failed to properly implement the EU’s anti-avoidance rules. This case involved a customer who wanted to sell his apartment in Berlin. He contacted the bank about selling the property and received a quote for €3.5 million ($4.1 million). After receiving the offer, he asked the bank whether the amount offered was too low. The bank told him that the price was fair.
However, the client later learned that the bank had already sold the same property to another buyer for €4.8 million ($6 million), which meant that the bank had earned a commission of nearly €600,000 ($750,000). In addition, the client discovered that the bank had agreed to buy the property from the second buyer for €3.9 million ($4.7 million) – meaning that the bank could earn a further €200,000 ($250,000) in commissions.
The client sued the bank for failing to comply with the anti-avoidance rules and won. The court ruled that the bank had violated the anti-avoidance provisions because it did not inform the client that the sale price being quoted was artificially high.
How to apply
The National Institute for Certification in Engineering Technologies (NICET) announced it will accept applications for its Certified Professional Engineer (CPE) program starting Monday, Jan. 21. Applicants must submit a resume, cover letter, three letters of recommendation and evidence of professional experience.
Applicants must be licensed in one of the following states: California, Colorado, Florida, Georgia, Illinois, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Texas, Virginia, Washington D.C., Wisconsin, or West Virginia.
Those interested in applying for the program are encouraged to do so soon because there is limited space available.
Qualifying periods
A qualifying period applies to employers who start up between 22 June 2010 and 06 September 2012. This includes those who started up during this timeframe and those who started up later.
Your first 10 employees must include anyone who joined your company before 22 June, 2010. You can hire additional employees after this date, but your employer National Insurance Contributions (NICs) cap cannot exceed £5,0000 per person.
If an employee leaves and re-joins your company, the qualifying periods starts again.
Employers who qualify for the qualifying period do not have to pay national insurance contributions for their first 10 employees. However, if an employee joins your company after 22 June, 2010, and before 06 September, 2012, you will have to pay national insurance contribution for each employee.
Limits on the relief
The government announced that it will introduce limits on the amount of tax relief workers are entitled to claim. From April 2020, employees earning up to £967 per week will receive the same level of tax relief as those on lower wages. This limit applies whether you are self-employed or employed by another person. If you earn over £967 per month, there is no cap on the total amount of relief you can claim. However, if you earn more than £967 per week, the amount of relief you can receive is limited to £967 per fortnight.
Qualifying period
The qualifying period starts on the first date of employment for veterans who were employed during their military service and lasts 12 months. It includes any periods of unemployment due to discharge or separation from active duty.
If you are eligible, you must file Form 21-8940 within 30 days of starting work, or within 60 days if you are filing for yourself. You do not need to file it if you are self-employed or employed by a nonprofit organization. If you are self-employed, you can use Form 21-8981 to report income earned during the qualifying period.
You cannot receive VA disability compensation while receiving unemployment insurance payments. However, you can continue to receive the VA pension and medical care.
Timeframes for filing claims
A retrospective claim cannot be made under section 5(1)(a) of the Act if the relevant qualifying employee dies before the end of the four year period. This applies even though the qualifying employee might still be alive during the four year period.
The deadline for submitting claims depends on when both the company and the qualified employee started working together. If the qualified employee worked at the company before the start date of the company, the claim must be filed within four (4) year from the end of his/her employment or the date of his/her passing, whichever comes first. However, if the qualifying employee commenced work after the start date of the qualifying business, the claim must normally be submitted within four years from the end of the qualifying employee’s employment.
However, there are exceptions to this rule. For example, where the qualifying employee commences employment with the business after the qualifying business starts, the claim must normally been submitted within four years from either the end of the qualifying employer’s employment or the death, depending on whether the qualifying employee commenced employment before or after the start date of his qualifying business.
In addition, where the qualifying employee does not commence employment with the business until after the qualifying business starts and he continues working for the business throughout the four year period, the claim must normally have been submitted within four years of his death.
If you think you qualify for a retrospective claim, please contact us to discuss your situation further.
Calculating your claim
The National Insurance Contributions Act (NICs) is one of those things we hear about but never really understand. If you are self-employed, it might seem like a minefield of rules and regulations, but there are ways to make sure you get paid what you deserve. Here is everything you need to know about calculating your claim.
What do I need to calculate my claim?
You need to calculate your claim if you want to receive payment for your earnings. You must submit this form to HM Revenue & Customs (HMRC). This includes submitting the correct amount of money to cover your earnings, plus interest and penalties.
How do I calculate my claim?
If you work for yourself, you need to use the Self Assessment Calculator to calculate your claim. You can find this online, or you can download the calculator here.
What happens if I don’t calculate my claim?
There are some circumstances where you won’t need to calculate your claim, such as if you earn less than £50,000 per annum, or if you are a sole trader. However, if you fail to calculate your claim, you could miss out on up to £2,500 in income tax relief.
Examples
National Insurance Contributions (NIC) are payable by employers where workers earn £7,874 or more per annum. NIC rates vary depending on whether you are employed full-time or part-time. If you work over 40 hours a week, you will normally be paid at the basic rate of 20% plus 2%. You can make up to four deductions for NICs.
If you work less than 40 hours a week, NICs are payable on earnings above £5,602. For every hour worked above this amount, you will pay 3% plus 0.5%. There is no limit to the number of hours that you can work. However, there is a cap on the total amount of NICs that you can receive during the tax year.
You are entitled to take annual leave and sick leave without affecting your entitlement to NICs. Annual leave is usually taken in blocks of 10 days. Sick leave is usually taken in one block of five days.
The maximum length of time that you can be absent from work without losing your entitlement to NICs is 12 months.
Overtime is defined as working more than 40 hours in a single week and is subject to different rules.
Example 1: An employee works 50 hours per week. They are paid £10,500 per month. Their employer pays them £2,912 in national insurance contribution.
They are entitled to claim back £1,928 of NI.
Review of NICs’ directors and annual profits
A director of his/her own company cannot claim NICs if he/she pays himself as an employee. If a director pays himself as an employee, he/she does not qualify for NICs. He/she must apply for NICs once the end of each calendar year. A director must assess his/her NICs annually or pro-rata based on his/her annual earnings. He/she must reconcile his/her accounts annually and report any excess NICs which exceed the salary threshold. When an employee earns more than the salary threshold, the employer needs to make sure that the correct amount of income tax is paid. This is called the annual reconciliation requirement. An employer needs to check if there are any excess NICs that should be taken into account. This is because the employer is liable to pay the difference between what it owes and what it actually receives. In addition, the employer must pay interest on the unpaid balance.
Completing your NICs holiday end-of-year return
The end of the tax year is approaching fast. As we head into April, it’s important to remember that there are still some things you need to do to prepare for the end-of-year NICs deadline.
If you haven’t already done so, make sure you submit your annual NICs return. This includes completing the weekly and monthly returns for any employees who were members of a contracted-out occupational pension scheme during the tax year. You must complete both the weekly and monthly returns each week of the year. Failure to do so could mean paying penalties.
You don’t have to wait until the end of the tax period to file your NICs return. However, you will need to complete an end-of-year report form. This should be filed within three months of the close of the tax year.
Form E89
The IRS announced today that it will begin accepting tax returns filed electronically via Form E89 beginning January 31st. The announcement came during a webinar hosted by the agency.
According to the IRS, Form E89 offers taxpayers several benefits over paper returns including:
• Electronic filing saves trees, reduces waste, and cuts down on printing costs.
• Taxpayers are able to file their returns faster since there is no need to wait for hardcopy forms to arrive in the mail.
• Paperless filing makes it easier to comply with privacy laws like HIPAA and GDPR.
• Electronic filing allows the IRS to improve accuracy and reduce errors.
• Electronic filing also enables the IRS to provide real-time data about taxpayer activity, such as payments received and refunds processed.
Form E92
The government has launched a new online tool to help small businesses claim National Insurance Contributions (NICs). Businesses are able to file their tax return online via the HMRC’s e-filing system, known as Form E. This form is available for businesses claiming NIC holiday relief for employees working abroad.
To complete this form, you must provide proof of residence, information about the business and its VAT Registration Number. You will also need to pay a £25 fee. If you do not already have a VAT account, you will need to register one.
If you want to find out more about how to file your taxes, please contact us here.
Reviewing your payment record
Your employer’s NICs holiday entitlement is based on how much money you earn during the tax year. If you are self-employed, it is calculated differently.
If you have paid too little National Insurance contributions (NICs), you could face a penalty chargeable to income tax. This is because you have failed to meet your obligation to pay into the NI system.
HM Revenue & Customs (HMRC) will review your position if there is evidence that you have been paying too little NICs. They will look at whether you have paid enough since April 2017.
You should submit an Employer’s Payment Summary (EPS) if you haven’t done so before. An EPS helps HMRC identify people who have not met their obligations.
Record keeping
You might think it’s easy enough to keep track of your mileage and expenses while driving. But there are many things to consider – such as whether you want to record every single trip or just the ones that make up most of your miles. You’ll also need to know how much tax you pay on fuel and whether you use a tracker app like MileIQ or a dedicated device.
If you decide to go down the route of recording everything, here are some tips to help you do it properly.
Start small
Don’t try to start tracking everything straight away. Start off by logging trips that are likely to be over 50 miles long. This way, you won’t end up spending hours entering data into spreadsheets. Once you feel comfortable with the process, you can expand your database.
Use apps
There are plenty of apps out there that can help you log your journeys. Some offer features such as automatic entry of GPS coordinates, whilst others allow you to enter information manually. If you already have a smartphone, then why not download one of these apps and see how they work?
Keep notes
Decisions and appeals
HM Revenue & Customs (HMRC) has announced changes to how businesses can appeal against mistakes or misapplication of the tax laws. These include decisions being taken away from HMRC employees and transferred to independent tribunals. This means that businesses will no longer be able to appeal directly to HMRC, but will now have to go to an independent tribunal.
Businesses must be careful about making an appeal too early or too late. If you make an appeal within three months of receiving a decision, there is a chance that the appeal won’t succeed. You’ll lose the opportunity to claim any refund if you do. However, if you don’t make an appeal within three years of receiving a decision, you risk losing the ability to challenge the original decision later.
There’s usually a limit on how many times you can apply for an appeal. In most cases, this is one per year. However, some types of appeal are unlimited. For example, if you’re appealing an incorrect assessment under the Value Added Tax Act 1994, you can apply for an unlimited number of appeals.
Frequently Asked Questions
How your average weekly earnings are calculated
If you work full-time hours and earn less than the threshold amount set by HMRC, you might still be entitled to receive maternity pay. This is because HMRC calculates your average weekly earnings based on how much you earned during the qualifying week. If you worked fewer than 40 hours during the qualifying week, it doesn’t matter whether you earned enough to meet the threshold; you don’t count towards your average weekly earnings. However, there are some exceptions. You can find out more about what qualifies as a qualifying week here.
When a regular payment is made early at Christmas
If you are making a regular monthly payment on Friday 24 December 2021, it should be treated as having been made on Friday 17 December 2021 for PAYE purposes and for National Insurance purposes. If you make a regular weekly payment on Friday 24 December (week 38), it should be treated as being made on Friday 17 December (week 37).
You will need to report both payments separately on the relevant FPS. Your employer will pay the regular amount on 17 December 2021 and the extra amount on 24 December 2021. This is because the regular payment is made on 17 December and the additional amount is paid on 24 December.
The key thing to remember is that you will need to report the payment made on 17 December 2021 as normal, even though it is actually paid on 24 December 2021 – and vice versa for the payment made on 24 December 2021. So report the regular payment on week 37 and the early payment on week 38.
How to report serious ill health payments under real-time information
A government initiative known as Real Time Information (RTI) aims to provide people with better access to public sector data. This includes information about benefits such as pensions and unemployment benefit claims. RTI is designed to help people make decisions based on facts rather than hearsay. However, there are some exceptions. One exception is for people making a claim for serious illness benefits. These are often referred to as ‘serious illness lump sums’. They are used to cover costs associated with long term illnesses like cancer. In many cases, they are taxed differently to regular income tax.
The rules around claiming these benefits are complicated. People must submit evidence showing they are suffering from a life threatening disease. If they don’t, they could lose out on up to £5,500. To avoid this, claimants can ask for a serious illness lump sum.
If a claimant asks for a lump sum, they must give notice to HMRC within 30 days. Once they have done this, they can apply for a serious illness lump sums. The deadline for submitting applications is usually three months after giving notice.
These applications are submitted online via the MyGov portal. There is no paper form – everything must be completed online. When filing an application, applicants must select either a ‘one-off’ or ‘flexi-drawdown’ option. A flexi-drawdown option allows someone to take money over several years. For example, it might allow someone to withdraw a certain percentage of their pension each month for five years.
There are different options depending on whether the person is self employed or working for another employer. Self employed individuals can choose between a ‘one-time’ or ‘rolling’ option. Rolling options let someone take a fixed portion of their salary each month for a set number of years.
For employees, there are two types of serious illness lump sums: ‘one-off taxable’ and ‘non-taxable’. Both require the same steps. The main difference lies in what happens next. With a ‘one- off taxable’ lump sum, the employee gets the money immediately. With a ‘non-taxed’ lump sum, he/she receives a tax free lump sum plus interest.
Once the application is complete, it goes into a system called ‘Real Time Information. This is a database containing all the information about a particular taxpayer. It contains things like their name, address, occupation, and earnings history. It also displays the amount of their monthly pension and the value of any previous serious illness lump sums.
The annual allowance is based on the number of days worked during the previous calendar year. This means you can claim up to three times the amount paid out each month. If you work fewer than 40 hours per week, you can still make use of the allowance.
You must pay the levy within 30 working days of receiving the money. You do not have to pay it again if you receive another payment within the same tax year. However, if you received less than the full amount, you will have to pay the remaining balance due.
If you have already claimed the allowance for the current tax year, you cannot carry it forward into the following year.
