If you have employees, and if one or more of those employees benefit from the use of facilities that you provide, cheap loans, a company car for example, it is well known that you as their employer will need to inform HMRC of the amount of these benefits following the end of the tax year.
Employers new to this situation would commonly appreciate that these benefits will have an impact on the affected employees’ personal tax, but they may not appreciate that the sum total of all benefits provided – to all their employees – will create an additional employer only, National Insurance Charge (NIC).
The NIC charge is classified as Class 1A contributions and is 13.8% of the total benefits provided.
Accordingly, if you provide a company car to three employees (employees would include directors in most cases) and the taxable benefit is £4,000 for each car provided, then the total Class 1A NIC charge that the company will need to pay is £1,656 (£4000 x 3 x 13.8%).
Compliance with the associated regulations that deal with benefits and assessment and payment of Class 1A NIC are set in stone. There are penalties for not submitting returns to HMRC on-time and penalties and interest if you are late in paying any Class 1a that may be due.
Existing clients that have been through this annual compliance hoop before will no doubt be aware what needs to be done. If you are a new employer, and have provided taxable benefits, we can help you to prepare and submit the employee benefit forms (P11Ds) and the annual P11D(b) return (that informs HMRC how much Class 1A you owe).
Please call if you need assistance with this process.
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