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Understanding the CA2700

Multiple employments & NICs deferment

All employees in the UK must pay primary Class 1 National Insurance Contributions (NICs) when they are in employment, aged 16 and over, are under the State Pensions age, and the earnings from employment exceed the Earning Threshold (ET).

Some employees or directors may have more than one job and so may find themselves subject to National Insurance Contributions for their multiple sources of income individually.

The law states that NIC liabilities arise in all employments, except where an individual has multiple employments and expects to pay primary Class 1 NICs on earnings that exceed the upper earnings limit or UEL (£844 per week) throughout the whole of the tax year and the UEL plus ET (£954 per week) for two employments throughout the whole year. In these special circumstances the HMRC allow employees or directors who have more than one job to apply to the National Insurance Contributions Office (NICO) for permission to defer some of their potentially contributions liability.

If an individual satisfies the conditions for deferment then they can submit a CA27A form. Normally the form is submitted prior to the start of the tax year but HMRC will accept the form up to 14 February during the tax year. They may accept a later submission up until 5 April of the tax year, but only with the agreement of the employer as the window for NIC refund by the employer may be missed.

If an application is accepted then the “Deferment Services” of NICO will issue a CA2700 form to the employer, which will authorise them to deduct primary NICs at a rate of 1% on all earnings from the Earnings Threshold (ET) for that tax year. A deferment certificate is only valid for the specified tax year and a new application is required for each subsequent tax year if the circumstances continue.

When employers receive a CA2700 certificate, it allows the use of the following NIC table letters for that employee or director:

• “J” for not contracted-out employment
• “L” for Contracted-Out Salary Related or Defined Benefit pension scheme membership
• “S” for Contracted-Out Money Purchase or Defined Contribution pension scheme membership

State Pension Age and deferment

HMRC do not usually allow deferment of Class 1 NICs for the tax year in which an employee reaches State Pension age. The exception to this is if a director can show that with the operation of an Annual Earnings Period that he/she will pay sufficient NICs before they reach state pension age,

Common Deferment Mistakes

The common mistakes made by payroll relate to the following scenarios, often when a certificate is received after the start of the tax year and payments have already been made:
1 Standard contributions have already been calculated
2 Directors who change contribution letters within the tax year
3 Aggregation of earnings cases were the certificate is received for one of the sub employment but not applied to the other.

When a CA2700 certificate is received and contributions have already been calculated on standard NIC category letters (such as A, D or F), then previous calculations need to reflect a refund, and recalculation of the first common mistake above is to apply the CA2700 on any new contributions only and not correct the prior entries for the same tax year.

Systems like those supplied by Ceridian will offer recalculation tools to facility the change to ensure that correct contributions amounts.  For those that don’t then the employer is obliged to:

• Re-calculate the employee NICs due at 1% on the earnings above the ET for all periods of the tax year
• Refund to the employee any overpayment of NICs
• Make adjustment to next payments to the Collector of Taxes (the Accounts Office)
• Adjust the table contribution letter
• Keep a record of earnings on which the employee NICs sould have been deducted

Equally, some employees apply for CA2700 certificates when they are in an aggregated earnings situation and an attempt is made to apply a standard NIC letter to one of the sub employment earnings and a CA2700 certificate to the other. This is not permissible – the CA2700 applies either to all employment under the tax reference being reported or none of them. The question is whether there are truly multiple employments or whether for NIC purposes there is only one employment.

Speak to one of our expert consultants and find out how Ceridian can help you achieve a more accurate and efficient payroll. Call 0800 0482 737 today.