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Data 'cleansing'
Data 'cleansing'
As reported (Taxation, 22 August 2002 at page 566), the Revenue has recently undertaken a data 'cleansing' exercise to remove duplicated or surplus National Insurance numbers from its computer system. Previously, when it has been found that the same numbers have been used for more than one taxpayer, the Revenue allocated a temporary number for its internal use to enable easy identification and correction once the proper number has been established. Unfortunately, in the recent exercise, these numbers (distinguishable as they start with two numbers then a letter followed by five numbers, e.g. 12A34567) were issued to employers by mistake. Some employers will have found that their computer system will reject these and they should then continue to use the pre-existing number, pending the issue of the correction in due course.
The Revenue is unable to quantify the exact number of erroneous notices that have been issued, but these were sent out in the four days up to 30 August 2002.
Revenue staff have been briefed on this problem and an article will appear in the September edition of the Employer's Bulletin. The Revenue states that employees' tax and National Insurance records will be unaffected by this error.
In addition to the importance of identifying the correct record to which National Insurance contributions should be credited, employers should generally take steps to ensure that the correct National Insurance numbers are obtained for their employees. It is understood that having too many temporary numbers is one of the criteria for determining whether a pay-as-you-earn scheme is chosen for investigation.
Pension conundrum
In the long-run, pension tax relief is usually more generous than that available on individual savings accounts, concludes recent research carried out by the Institute for Fiscal Studies. For many individuals the tax system provides an incentive to save in an individual savings account before 'drip-feeding' their funds into a private pension in the run-up to retirement, as well as allowing them access to their funds at any time.
People who expect to retire onto means-tested benefits will need to think particularly carefully about whether to save for their retirement at all, and if so whether to save in a pension or an individual savings account. Means-tested benefits for older individuals are going to be more generous, and this will reduce the financial incentive to save for some individuals.
The Tax and Benefit System and the Decision to Invest in a Stakeholder Pension can be downloaded from www.ifs.org.uk.
