Employers national insurance to stay as separate entity

In his Budget statement last month, George Osborne, said the government would hold a consultation into simplifying the income tax and National Insurance system with a view to merging the two together.

However, an official from the Treasury has now confirmed that the system for employers’ national insurance would not change and any possible merger would only affect the operational aspects of the systems. The Chancellor did say that he had ruled out a complete merger and the Treasury statement backs this up.

The Office of Tax Simplification has recommended that the two systems be merged and John Whiting, its tax director, said he was disappointed that the NI contributory principle would not be reviewed.

A spokeswoman for the Treasury said that whilst employer national insurance contributions would remain as a separate charge, the government consultation will examine the possibility of reforming the tax and NI system to reduce the associated burden of administration.

Simplifying the system could take years because of the complexities involved. For example, pensions are not subject to NICs, neither are other forms of non-earned income, such as savings.

Meanwhile, accountants should be aware that the coalition has closed the loophole that let people move their pension to Hong Kong, whilst still remaining a resident in the UK. This move is part of the government’s ongoing crackdown on tax avoidance.

People who are legitimately moving abroad can still liquidate their UK pension under the Qualified Registered Overseas Pensions scheme.

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