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Very
nearly all taxable benefits are subject to either Class 1 National
Insurance Contributions (with contributions due from both employer and from the employee as
well) or Class 1A NICs (where the charge is payable only by the
secondary contributor, normally the employer).
Schemes
by which NICs could possibly be avoided - e.g. by payment to employees in
'platinum sponges' or by making school fee payments direct from the
employer to the school are no
longer available.
Key Dates
-
Benefits on which Class
1 NICs are payable should be put through the payroll and payment of
NICs for 2007/08 is due (with NICs on salary payments) by 19
April 2008.
-
Benefits on which
Class 1A NICs are payable are shown on forms P11D which are due by
6 July 2008. Form P11D(b), which accompanies all forms P11D, shows the
total Class 1A charge due.
-
Payment of the Class 1A NIC
is due by 19 July 2008.
Employers will be aware
that penalties can be imposed if forms P11D are submitted late.
However, such penalties are rarely imposed and there is unlikely
to be any charge, provided the forms are submitted before HM Revenue
& Customs takes any action.
However, even if a penalty is not imposed, interest will
be charged if the Class 1A liability is not settled by the due
date of 19 July. It is, therefore, now more important than ever
before for employers to comply with the P11D filing date of 6
July.
Action to be
taken
If the employer provides
benefits but is not required to submit a P11D return, they may not
be affected by Class 1A provisions.
This might be the case
where the only benefits provided are:
-
exempt
from Income Tax
-
included
in a P11D Dispensation
-
returned
on form P9D (employees earning at a rate of less than £8,500),
or included in a PAYE Settlement Agreement
-
those
upon which a Class 1A NI liability is already payable, such as
non-cash vouchers or readily
convertible assets
In other cases, employers should:
-
make
sure payroll and finance staff are aware of the benefits
attracting a class 1A NI charge
-
check
that procedures are adequate for capturing information and accurately completing forms
P11D
-
consider
any changes or improvements that could be made to internal forms and systems to assist
in the completion of forms P11D
It is also suggested that
employers read the Inland Revenue guidance CWG5 (2008) 'Class 1A
National Insurance Contributions on Benefits in Kind'. The guide
provides a detailed list of the most common types of benefits and
expenses employers provide and indicates which will attract a
Class 1A NI charge.
Calculating
Contributions
The Class 1A NI liability
will be calculated by using the information provided on form P11D.
The design of the forms, together with the guidance notes on
how the P11D should be completed, will allow employers to readily
identify those benefits which will attract the new Class 1A NI
charge. From the information contained on the completed form P11D
employers should be able to calculate the amount of Class 1A NI
contributions payable by:
The Inland Revenue will
also provide an optional working sheet to help employers calculate
the correct liability.
Benefits
and Expenses
Where a benefit is provided
or expenses are paid and the employee would be able to claim a
full matching deduction for tax purposes, no Class 1A liability
will arise. This may be the case where, for example:
-
the
benefit is necessarily provided for use by the employee wholly
and exclusively in the
performance of the duties of that employment, or
-
expenses
are incurred by an employee in the course of qualifying
business travel
P11D Forms
Forms P11D and
P11D(b) can be obtained by calling the employers' order line on 0845
764 6646 or by downloading them from the HM Revenue & Customs web
site at
www.hmrc.gov.uk or from the Employers CDROM 2008.
Method
of Payment
Class 1 NICs are paid under the
PAYE system, the final payment for 2007/08 being due 19 April
2008.
Class 1A NICs are payable in one
sum by 19 July 2008. A payslip for this purpose will
normally be sent out to the employer with the form P11D(b) for use
by the due date.
Summary
Employers need to ensure procedure
for reporting, calculating and paying Class 1 NICs and Class 1A
NICs are in place.
Few planning opportunities are currently
available, but if
the employees' earnings are below the primary lower
earnings threshold, the old principle that where possible
the employer should contract directly with the third party
rather than meeting the employees' liability on his or her
behalf or subsequently reimbursing the employee, still
holds true. Arranging affairs in this manner will generally
bring the charge within Class 1A rather than Class 1,
potentially saving primary contributions, and at least the
uncapped 1% on employees' class 1 NIC.
Please
note: This guide is intended to provide basic information only.
Where specific advice is required, we recommend that you seek proper
professional help; either from this firm or other suitably qualified
person or practice. |
