Company News

National Insurance - Common Sense Prevails at Tax Tribunal

CW Fellowes successfully defended their client against a significant national insurance assessment at a recent tax tribunal.

Our client company owned a helicopter which was used for both business and private purposes by its director. 

The private use of the helicopter benefit was declared and subjected to both tax and national insurance. 

A standard review of the company's Pay As You Earn records was undertaken by HM Revenue & Customs (HMRC) in June 2005 which resulted in HMRC raising a  national insurance assessment on the business use element of the helicopter running costs.

CW Fellowes appealed on the company's behalf, claiming that the business usage of the helicopter should not be subject to Class 1A National Insurance.  The issue in point was whether the director's claim for a deduction for business use of the helicopter, which was clearly allowable for income tax purposes, was also allowable for Class 1A National Insurance purposes.

The Tribunal Judge accepted the company's contention, as advocated by CW Fellowes, that the deduction for tax purposes should apply equally to national insurance.
 
This positive, equitable, outcome comes at a time when there continues to be differing rules and systems for income tax and national insurance. 

The Treasury is able to provide a long list of recent National Insurance Contributions (NIC's) alignments with the income tax system and the Government has stated its intention to continue to review tax and NIC legislation in order to align rules further where possible.  

However, we have found our recent success to be short lived with the introduction of amended National Insurance legislation from 5 April 2007.  This amendment is specifically designed to reinforce the position that national insurance (but not income tax) falls due where there is mixed business and private use of business owned assets.

The interaction of tax and national insurance remains complex, therefore, and we wait to see how far future governments are willing to progress the alignment of the income tax and national insurance systems and remove the apparent inequity which currently exists in the system. 

If you would like advice on how CW Fellowes might be able to successfully assist you in defending HMRC taxation assessments, please contact Matthew Harrison on 023 80247070 or e-mail him at: mharrison@cwfellowes.com.