We have recently taken on a new client from another practise. They have 15 employees and for some reason they haven't been paying employers NIC on one of their employees.
We have been through the payroll records back to when she started in 2011 and they have never paid employers NIC for this employee. She turned 21 in 2015 so I know there would have been an exemption for a time there but nothing else as far as I'm aware and the employer doesn't know either.
Does anybody know of any reason why they wouldn't need to pay employers NIC on an employee who earns over the threshold? Or have I got some very bad news for our new client.
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Apprentice under 25 (Table H) with earnings below Apprentice Upper Secondary Threshold (same as UEL - £45,000 in 2017/18)?
Assuming that Employee contributions have been properly deducted, it is more than likely that whoever manages the payroll has simply neglected to change the coding when the employee turned 21. Most software will throw up a warning, which a surprisingly large number of people will simply ignore if they don't understand them.
Are you sure they're not an apprentice? Because it certainly seems like either they are or their details in the payroll software are entered incorrectly either making them an apprentice or making them younger than they are. I can't think of any other reason this one employee would be exempt.
Thanks for all the responses.
The employee is definitely not an apprentice, the company has no apprentice scheme and the work they carry out is unlikely to qualify.
I don't think the age of 21 is a factor, as the new rules on employer contributions came in from 6th April 2015 and they were not including employers NIC back as far as 2011.
The only thing I can think of is that they started before they were 16 and the payroll setup was never corrected.
I think the previous accountants were using moneysoft the same as us. There is tick box to disapply employers NIC but doesn't flag up any warnings.
Looks like it could be bad news for their cash flow then.
Isn't that something to do with US companies? Neither the employee of the company have any connection to the US.
Have you thought to ask the previous practice? Who dealt with the payroll, the client or their previous accountants? Why didn't the previous accountants spot this when you have?
What NIC letter has been applied and reported to HMRC?
Apart from the more recent under 21 and under 25 apprentice NIC categories, the only other exception is for an employee of an overseas business that has no formal place of business in the EU or a UK employee of a foreign diplomatic mission for a non-EU nation.
It can be genuine that there is no employer NIC in these unusual circumstances, whether they apply to this individual is another matter. It may be that the software flag (which is valid where genuine) has been applied to an individual that does not qualify.
There were also period of NIC holiday, but if that had been operated, the contributions would have been recorded against the individual with the employer claiming back the employer NIC equivalent amount up to the allowable limits as a separate claim.
The NIC letter operated may give a more definitive clue.
I use Moneysoft and was just doing the payroll for a client, noticed their NI had gone up. An employee turned 21 this month and Moneysoft automatically calculated the NI. I don't know if you can go back to the month she turned 21 and see why this didn't work.
I had never entered any other info or ticked any NI boxes, so it used her date of birth.