How does National Insurance harmony affect your business?
New regulations regarding National Insurance contributions have been introduced in a bid to "harmonise" the various schemes operating in the European Union (EU), but how will the changes affect your business?
Small businesses operating in the UK may have been among those to be pleasantly surprised by recent announcements regarding National Insurance contributions (NICs) from the new government.
In the coalition's first Emergency Budget, chancellor George Osborne announced that the threshold at which employers start to pay NICs will increase by £21 per week from the start of the new tax year.
Mr Osborne also unveiled a new tax scheme aimed at easing the NIC burden on new businesses operating outside of London and the south-east.
Under the terms of the initiative, new businesses in Scotland, Wales, Northern Ireland, the north-east, Yorkshire and the Humber, the north-west, the East Midlands, the West Midlands and the south-west will benefit from a degree of NIC exemption.
Start-ups in the specified regions will be exempt from NIC for the first £5,000 on their first ten employees, saving them up to £50,000.
However, these are not the only changes to have recently been announced and a number of firms could be confused by plans to "harmonise" the various social security schemes operating within the European Union (EU).
In a bid to create a system which lets EU member states exchange information electronically, the UK will notice some changes to its rules regarding NICs.
Accountancy technology specialist CCH has published a guide in a bid to show businesses and individuals how they are affected.
According to the firm, individuals who normally work in the UK have had the time limit on how long they are covered by their home state's legislation doubled.
Under the previous rules, UK-based workers would be subject to the legislation of another EU country if they were temporarily placed there for longer than 12 months.
However, under the new ruling, workers from the UK can work in another state for up to 24 months before they are then subject to that country's legislation.
"As of May 1st 2010 a temporarily-posted worker can remain subject to the legislation of the first member state if the work is not expected to last more than 24 months in the first instance," CCH explained.
"The forms E101 and E102 will be replaced by a form A1, to show that the individual is entitled to continue paying UK NI."
A simplification of the rules regarding people who work in two or more member states has also been attempted with individuals being placed under the legislative jurisdiction of their country of residence providing a "substantial" part of the worker's activity is conducted there.
HMRC explained: "If less than 25 per cent of the person's working time is carried out in the UK and/or less than 25 per cent of the person's remuneration is earned in the UK this will be an indicator that a substantial part of all the activities of the worker is not pursued in the UK."
Individuals and businesses that are affected by the new rules could be encouraged to seek the services of a specialist tax accountant in order to make sure all their affairs are up to date.
Posted by Thomas Fletcher
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