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School's Out

It used to be possible to save National Insurance by getting your employer to buy you goods and services - there was no NIC on benefits in kind, even if they were charged to income tax. In recent years, NIC have been charged on benefits, and most of the saving has gone. But there was always a big trap, which was illustrated in a recent tax case: the employer actually had to buy the thing and give it to you. If the employer just picked up the bill, when really the employee was due to pay it, NIC would still be due as if the employer had paid cash. The case was about school fees. A parent put his son down for a private school as soon as he was born, but when the child went to school at the age of 5, the father agreed with the school that his own company would pay the bills. The invoices were raised in the name of the company, and the company paid them, and income tax was paid but no NIC. Not good enough! The Revenue successfully argued that the contract had always been between the parent and the school. The school agreed to issue invoices to the company as a matter of convenience, but it was clear that the parent was primarily responsible for paying the fees. If you want advice on what really saves NIC, or to make sure that you are paying the right amount, we will be happy to advise you. The case was heard by the Special Commissioners and can be found on the Tax Tribunals' website under the reference Frost Skip Hire (Newcastle) Ltd v Wood SpC00420.