National Insurance holiday scheme

The new regional National Insurance Contributions holiday came into effect on 6 September 2010.

New businesses set up outside London, the South East and East of England are now eligible for a NIC holiday of up to £5,000 for each new employee they take on in the first year of their business. The scheme will last from 22 June 2010 to 5 September 2013

You can claim if your new business started after the last Budget date, 22 June 2010.

The following conditions apply:

1.Holiday applies to the first 10 employees taken on in the first year of the new business.
2.The holiday period for each employee will last for the first year of his or her employment or a shorter period to 5 September 2013 when the scheme ends.
3.The maximum saving of NIC contributions for each employee will be limited to £5,000.
4.The NIC holiday is subject to a formal application to HMRC when you engage your first employee.
5.There are anti-avoidance provisions to prevent existing businesses from reorganising their affairs to qualify for the relief.
6.The NIC savings are limited to secondary employer’s contributions.
7.The principal place of business must not be in an excluded area (see full list below)
If you think you may be eligible for this new relief and would like our help applying to HMRC please call.

Excluded regions:

•Greater London
•Eastern Region comprising; the counties of Bedford, Cambridgeshire, Central Bedfordshire, Essex, Hertfordshire, Norfolk and Suffolk. The non-metropolitan districts of Luton, Peterborough, Southend-on-Sea and Thurrock.
•South East Region comprising; the counties of Buckinghamshire, East Sussex, Hampshire, the Isle of Wight, Kent, Oxfordshire, Surrey and West Sussex. The non-metropolitan districts of Bracknell Forest, Brighton and Hove, Medway, Milton Keynes, Portsmouth, Reading, Slough, Southampton, West Berkshire. Windsor and Maidenhead and Wokingham.

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What do self employed people get for their NIC contributions?

We are often asked to comment on the state benefits you will or wont be able to claim if you are self-employed and pay the basic Class 2, and the earnings related Class 4 contributions.

Class 2 contributions will qualify you for most of the benefits that an employed person can claim. (Employed persons pay Class 1 contributions.) The two main exceptions are earnings related state pension and contribution-based Jobseekers allowance.

If you are self-employed and are unable to work due to illness you should be able to claim incapacity benefit. However you may disqualify yourself if you make occasional visits to your workplace. You may also have difficulties if you work from home, proving that you do no work.

Class 4 contributions do not count towards any benefits (in other words, its just tax).

Retirement pension
Two useful points. You may be able to combine your contribution record with your husband’s, wife’s or civil partner’s contribution record if:

  • you are widowed
  • You are the surviving partner of a civil partner who has died
  • you are divorced
  • your civil partnership has been dissolved

The number of years contributions required to qualify you to a basic state retirement pension is 30 years if you are due to reach retirement age on or after 6 April 2010.

Check if NI numbers and VAT numbers are valid

A guide to help you determine if NI numbers and VAT numbers are valid.

Certain PAYE returns (P35, P11D) will be rejected by HMR&C if a National Insurance number (NINO) is incorrectly displayed. Valid numbers always follow the same format, two letters, followed by six numbers, followed by a single letter. i.e. AB123456D.

The following information sets out the valid alpha prefixes and suffixes. If you are at all uncertain that you have been given a correct NINO, you should check with your local tax office.

Valid National Insurance Number Prefixes:

AA, AB, AE, AH, AK, AL, AM, AP, AR, AS, AT, AW, AX, AY, AZ BA, BB, BE, BH, BK, BL, BM, BT CA, CB, CE, CH, CK, CL, CR EA, EB, EE, EH, EK, EL, EM, EP, ER, ES, ET, EW, EX, EY, EZ GY HA, HB, HE, HH, HK, HL, HM, HP, HR, HS, HT, HW, HX, HY, HZ JA, JB, JC, JE, JG, JH, JJ, JK, JL, JM, JN, JP, JR, JS, JT, JW, JX, JY, JZ KA, KB, KE, KH, KK, KL, KM, KP, KR, KS, KT, KW, KX, KY, KZ LA, LB, LE, LH, LK, LL, LM, LP, LR, LS, LT, LW, LX, LY, LZ MA, MW, MX NA, NB, NE, NH, NL, NM, NP, NR, NS, NW, NX, NY, NZ OA, OB, OE, OH, OK, OL, OM, OP, OR, OS, OX PA, PB, PC, PE, PG, PH, PJ, PK, PL, PM, PN, PP, PR, PS, PT, PW, PX, PY RA, RB, RE, RH, RK, RM, RP, RR, RS, RT, RW, RX, RY, RZ SA, SB, SC, SE, SG, SH, SJ, SK, SL, SM, SN, SP, SR, SS, ST, SW, SX, SY ,SZ TA, TB, TE, TH, TK, TL, TM, TP, TR, TS, TT, TW, TX, TY, TZ WA, WB, WE, WK, WL, WM, WP YA, YB, YE, YH, YK, YL, YM, YP, YR, YS, YT, YW, YX, YY, YZ ZA, ZB, ZE, ZH, ZK, ZL, ZM, ZP, ZR, ZS, ZT, ZW, ZX, ZY

The characters D, F, I, Q, U and V are not used as either the first or second letter of a National Insurance Number prefix.

Valid National Insurance Number Suffixes:

The final alpha of the NINO should be A, B, C, or D.
VAT Registration numbers

There are occasions when the validity of a VAT registration number is critical. Particularly:

  • When you make a supply to a registered European Union trader, or
  • When you receive an invoice from a supplier on which VAT has been added.

Supply to EU trader

If it appears that the VAT number you have been given is incorrect, you should charge VAT rather than exempt the supply.

Purchase of goods/services from registered UK trader.

One of the aspects that qualifies a supply for a reclaim of input tax charged, is if the invoice shows a valid VAT registration number. Although HMR&C have discretion to allow a deduction even if the number is wrong, the discretion only applies in certain circumstances.

How to check a VAT registration number.

There are two ways to check the validity of a VAT number:

1. Call HMR&C 0845-010-9000.
2. A more hi-tech solution, visit the Europa web site at http://ec.europa.eu/taxation_customs/vies/vieshome.do, select the correct member state and enter the VAT number you have been given. This will only confirm if the number is a valid registration number. There is no way to use this service to confirm the number belongs to your customer/supplier

Davies McLennon are Stockport Accountants

Loans and national insurance

  • A loan itself is not remuneration for National Insurance purposes. Consequently no Class 1 contributions are due on the granting of a loan, or on the cash equivalent of a low interest or interest free loan.
  • Class 1a contributions may become due if the loan is waived, written off, or if the employee/director does not pay interest on the loan at an amount equivalent to the “official rate”.
  • An advance of pay is treated as a loan – any tax or National Insurance becomes deductible when the normal pay date arises.
  • Loans provided to employees who are unable to work due to injury or accident will be subject to a National Insurance charge unless the loan is repayable whatever the outcome of the employee’s claim for damages.
  • These rules apply to directors and other employees.