SE12033 - NIC avoidance: dealing with open cases

Dealing with open NIC cases

Before 1 April 1999

Before 1 April 1999 if an employer argued that no NIC were due on a particular payment, and agreement could not be reached with the Contributions Agency (CA), the employer could apply to the Secretary of State (SoS) for a formal determination of a question under Section 17 of the Social Security Administration Act 1992.

The SoS appointed an Inquirer to gather evidence, establish facts, consider the relevant legislation and make a recommendation to the SoS. The SoS made a formal decision and if, not satisfied with this decision, the employer could ask for a Statement of Grounds and appeal to the High Court on a point of law.

Before 1 April 1999 there were several dozen SoS decisions in cases involving payments of life assurance premiums and awards of rhodium, gold coins and platinum sponge. In all these schemes bar one, the SoS decided the non-cash remuneration was subject to employers' NIC.

In one case involving an assignment of trade debts the SoS decided the award was not subject to NIC. Personal Tax thinks this decision was erroneous but there was no provision to allow an appeal against the SoS decision and so the decision applies in that one case only.

Employment Income Technical does not accept the NIC decision in this one trade debt case has any application to other trade debt cases, or to any other non-cash remuneration schemes, and will ask the Commissioners to consider another case.

From 1 April 1999 onwards

Following merger of CA and IR on 1 April 1999 new procedures were introduced for dealing with cases where employers contest an obligation to account for NIC. A NIC decision will be issued and if the employer does not agree with this decision an appeal can be submitted for hearing by the General or Special Commissioners.

If a NIC appeal looks likely to be considered by the Commissioners, you should explain to the employer that there is separate law covering PAYE and NIC in cases of non- cash remuneration and that the Commissioners or Courts will consider the PAYE and NIC appeals separately. For an overview of NIC legislation relevant to non-cash remuneration see SE12101.

PAYE and NIC Directorate, Longbenton

Just as Employment Income Technical co-ordinates the handling of PAYE appeals on non-cash remuneration schemes (see SE12030), PAYE and NIC Directorate, Longbenton co- ordinates the handling of NIC appeals in non-cash remuneration cases. Please submit all cases of difficulty regarding NIC to them.