Payments to the Accounts Office - Penalty regime for unpaid Class 1 NICs and Student loan deductions

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13 March 2008

In one of the January 2008 newsletters, we explained that, when making monthly or quarterly payments of tax and NICs to the Accounts Office, there was no longer a requirement to split the payment into separate amounts of tax and NICs. The 2008/09 payslips that have to accompany cheque payments ask only for the gross payment, not for the split values. The payment due may also include amounts in respect of tax collected under the Construction Industry scheme and student loan deductions.

This procedural change requires adjustments to be made to Schedule 4 of the Social Security (Contributions) Regulation 2001. These have been made by means of Amendment Regulations that come into force from April 2008.

Paragraph 15 and 17 of Schedule 4 allows HMRC to assess an employer for unpaid NICs if the employer fails to pay over NICs by the monthly or quarterly payment deadline. The amount assessed has, until now, been based on the amounts of Class 1 NICs that have been paid for previous periods. As, from April 2008, the employer is no longer required to show the amount of NICs being paid separately, it will not be possible for HMRC to identify the amount of NICs that may have been due for a particular period until the P35 is filed at the tax year end. Accordingly, in assessing an employer for amounts of tax and Class 1 NICs (and Construction Industry tax and student loan deductions) that were not paid for a particular period, HMRC will no longer have to identify the specific amount of NICs that it believes was due, only to specify the combined total amount of tax and NICs. Nevertheless, HMRC retains the power to make an assessment for one or more specific component, for example, where it is believed that an employer has not paid over Construction Industry tax but has paid over all of the other components.

Paragraph 17 of Schedule 4 makes similar provision with regard to interest that falls due on amounts of Class 1 NICs that are unpaid for the whole tax year at 19/22 April, or Class 1B NICs that are unpaid at 19/22 October. The amount of interest assessed does not, from 2008/09, have to identify the specific component to which the interest calculation relates.

Changes for a different purpose are also made to paragraphs 22 and 31 of Schedule 4. From 1 April 2008, the new penalty regime set out in Schedule 24 of the Finance Act 2007 comes into force in respect of incorrect documents and assessments relating to income tax, PAYE, corporation tax and VAT. The Amendment Regulations now extend the same penalty regime to documents relating to NICs. However, under the transitional arrangements, no penalties under the new regime will be imposed in respect of any tax period for which a return is required to be made before 1st April 2009.

By means of separate Regulations, the new penalty regime is extended to the recovery of student loan deductions in respect of returns made by the borrower and assessments of amounts owing. However, no changes are made to the penalty that may be imposed if an employer makes incorrect deductions from the borrowers earnings or makes incorrect payments to the Accounts Office, namely a penalty of up to £3,000.

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Further information:
The Social Security (Contributions) (Amendment No. 3) Regulations 2008
Explanatory Memorandum to the Social Security (Contributions) (Amendment No. 3)
The Finance Act 2007, Schedule 24 (Commencement and Transitional Provisions) Order 2008
The Education (Student Loans) (Repayment) (Amendment) Regulations 2008

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