The case concerned the liability of a company to pay additional national insurance (NI) on the school fees paid on behalf of the director’s son. The company paid some of the school fees and the dispute revolved around whether the company was meeting a personal liability of the director and owner, Mr Frost.
Not long after his son’s birth, Mr Frost filled in and signed a form of application for his son’s admission to a school. Initially the Frosts paid the school fees. However from the end of the first term the fees were invoiced by the school to the company.
The Commissioner found that, on lodging the signed application form, Mr Frost indicated that he would be responsible for his son’s fees, if his son should be accepted as a pupil. It was clear that Mr Frost was offering to make himself liable for payment of the school fees, term by term, for so long as his son might remain at the school. There was no written contract. There was no evidence of a renegotiation of contractual arrangements between the school and the company.
Moreover a parent had both a legal duty and a moral obligation for the education of his or her child. A limited company had no connection with or responsibility for the child. It was highly unlikely that the school would have been prepared to substitute the company for the parents as the person with which it dealt contractually.
Hence the liability had only ever been that of the parents to pay the school fees and, therefore, additional NI was due.
The moral of the story is that if the payment of school fees is to be done in a tax and NI efficient manner, there is a high degree of paperwork and advice required.