Employer NIC protections and 'exemption'?

You’ll have to forgive me, I’ve been surviving on water and dry crackers for a week after a particularly troublesome bug. And in my Jacob’s cream cracker haze*, I kept reading about an ‘NHS and public sector exemption’ for the employer NIC rise of 1.2% next April.

As a tax geek, I kept wondering whether I had missed an extraordinarily important announcement within the hundreds of pages of budget documentation and subsequent analysis. “An NIC legislative exemption? Surely I didn’t miss that?”.  I re-read the Budget documents, OOTLAR and analysis, and dragged poor Andrea in as well, and there definitely ISN’T an exemption for the public sector.

Instead, all public bodies will still be paying the 15% employer NIC charge as of April next year, but the government will be providing additional funding to certain public bodies, including the NHS to meet the cost of the 1.2% increase.

Unfortunately, it hasn’t been a simple exercise to find out who will and won’t be granted the additional funding protections. But spoiler alert – the higher education sector has not been selected...

This is what we know so far on who will likely receive the additional funding:

1. NHS - The NHS Confederation states:

“HM Treasury appears to have made an allowance for public sector bodies in its employer national insurance calculations, however, we have approached the Treasury for confirmation on the exact impact for NHS employers or its overall impact on the net NHS funding increase.”

As you may have seen in other publications, there is an outcry from GPs, dentists and care homes who will not be covered by the NHS protection.

2. Schools - Politics Home reports that state schools will be fully reimbursed for the employer NIC rise.

Leora Cruddas, chief executive of the Confederation of School Trusts, said: "We are pleased that the DfE has confirmed schools will be compensated to cover the increase in employer National Insurance contributions.

"We have yet to understand the amount or methods of compensation but DfE has confirmed that the compensation will be to cover the net effect of all the NIC changes.

"The changes to NI are extremely complex and we will continue to work with the DfE to bring greater clarity on this."

3. Local government - this LGA briefing document calls on the Government to provide “clarity on whether councils will be protected from extra cost pressures from the increases to employer National Insurance contributions for directly employed and contracted out services.”
4. In Wales – the Western Telegraph reports “Mark Drakeford confirmed the UK Treasury will cover increased costs of national insurance in the public sector amid concerns additional funding could be 'swallowed up' by tax rises.

The former first minister said Wales will receive full funding for employer national insurance (NI) contributions for public sector workers, as defined by the Office for National Statistics.”

There is clearly still considerable confusion about who the Government will provide additional funding for, or how it will be measured. We’ll keep looking out for nuggets and share with you on the discussion boards.

* other cream crackers are also available, but I didn’t have them in the cupboard