Payment of Class 1A NICs

Extended information has been provided by the Inland Revenue to help large employers meet their new obligations for mandatory electronic payments, starting with the first payment due by 22 May 2004. Guidance has also been provided on how to make payments of Class 1A NICs, payable by employers on the provision of benefits-in-kind and due by 19 July 2004.

Payment of Class 1A NICs electronically is not a statutory requirement for any employers, including large employers.

For the 2003/04 tax year, the payment deadline continues to be 19 July. Payment may continue to be made by sending the special payslip and cheque to the Accounting & Payments Service, Accounts Office, Shipley, to arrive by Monday, 19 July. If payment is made electronically, the deadline is also 19 July, although BACS and CHAPS payments that arrive on 20 July will be treated as having arrived on 19 July and no late-payment penalty will be incurred.

The new 22nd payment deadline for electronic payments will only apply to payments of Class 1A NICs for the 2004/05 tax year. All employers paying electronically, not just large employers, will be able to take advantage of the later deadline.

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...back to 7 May 2004


Source: www.inlandrevenue.gov.uk/howtopay/index.htm

Class 1A NICs

A "rogue" statement in one of the Inland Revenue's Budget press releases has caused some employers to believe that the rate of Class 1A NICs paid on the provision of company cars will rise substantially from April 2003.

The offending sentence appeared in press release REV BN2, as part of a detailed explanation of the new method of calculating fuel scale charges from April 2003. The document explained that the fuel scale charge will be calculated by using the same percentage figure that is used from April 2002 to calculate the car benefit charge, i.e. a figure of between 15% and 35%, according to the CO2 emission levels of the car. That percentage is multiplied by the car's list price to give the car benefit and, from April 2003, by a set annual figure, since announced as £;14,400, to give the fuel benefit charge where the employer provides fuel for private use. (See the Budget Report in issue 223 of Payroll Briefing)

Having explained that the same percentage figure, between 15% and 35%, will be used for both the car benefit and fuel benefit charges, the press release went on to say:

"This same percentage figure will be used to calculate the tax and Class 1A National Insurance contributions due on both car and fuel benefits".

Taken literally, this sentence says that, for example, if the percentage used to calculate the car and fuel benefits were 25%, that same percentage would be used to calculate the tax that the employee would pay and the Class 1A NICs that the employer would pay on the provision of the benefit. That is clearly wrong.

Replying to an enquiry from the author, the Revenue's press office stated:

"Your query is currently with our Policy people who have said that they can see where the confusion arises and are considering the best way to clarify the press release. As you have said, the correct treatment is that the percentage figure is used to calculate the fuel scale charge on which tax and Class 1 NICs are payable".

What the press release should have said was that the same percentage figure will be used to calculate the cash equivalent value of both the car and fuel benefits, on which the employee will pay tax and the employer will pay Class 1A NICs.

By way of confirmation, the Class 1A NICs rate for 2001/02 is 11.9%, for 2002/03 it is 11.8%, and for 2003/04 it will be 12.8%.
Payroll Briefing 1 - 11 June 2002

Table letter Y

Liabilities for Class 1A NICs were due to be paid to the Collector by 19 July. The new reporting and payment arrangements for Class 1A NICs fully replace the two methods that were used in previous years, namely (1) the payroll method which involved creating Table Letter Y entries for each employee for whom the employer had a liability and subsequently paying the Collector, and (2) the alternative payment method which simply involved sending a report and payment direct to the NICO.

Although the Revenue made the new reporting and payment method clear, little has been said about discontinuing the Table Letter Y procedure and at least one developer has erroneously continued to provide this recording facility. In case readers are in any doubt, this former procedure has been scrapped in its entirety and no entries should be made in the payroll against Table Letter Y. Class 1A NICs are an employer-only tax and the Revenue does not require any breakdown of the amounts paid at the employee level. When P14s are produced after the end of the current tax year, no Table Letter Y entries should appear. - Payroll Briefing 207 - 28 August 2001

Class 1A deadline

This is a final reminder that the Class 1A liability on benefits reported on P11Ds submitted by 6 July is due for payment to the Collector of Taxes by 19 July. Around 300,000 employers provide taxable benefits for their employees. - Payroll Briefing 205 - 4 July 2001

Class 1A NICs

Section 10 of the Social Security Contributions and Benefits Act 1992 provides exceptions from a Class 1A NICs liability in certain circumstances. It states that any amount that would otherwise have to be included in an employee's emoluments and thereby have to be reported on form P11D is not subject to Class 1A NICs if the tax legislation allows the employee to claim a fully matching tax deduction. An example would be an overnight stay in a hotel that is a necessary part of a business trip.

The emoluments that are covered by these provisions are currently:

• expenses incurred by an employee on business journeys
• amounts expended wholly, exclusively and necessarily in the performance of the duties of the job
• fees and subscriptions to professional bodies
• amounts paid in discharging liabilities or in obtaining indemnity insurance
• expenses incurred by a minister of religion in performing the duties and maintaining the residence

New Regulations have been made that extend the list of benefits that qualify for full tax relief and that, as a result, have no Class 1A liability. These are:

• the provision of board and lodging for employees working outside of the UK, whether the cost is borne by the employer or reimbursed
to the employee
• up to two return journeys in a tax year by an employee's spouse or children to visit the employee while absent from the UK for 60 days
• or more, whether the cost is borne by the employer or reimbursed to the employee
• travel by an employee, not domiciled in the UK, to and from the UK, and up to two return journeys in a tax year by such an employee's
spouse or children to visit the employee while working in the UK for 60 days or more, whether the cost is borne by the employer or
reimbursed to the employee
• certain security assets or service benefits provided to employees because of a special threat to their security arising from their
employment.

Exemption from Class 1A NICs in these circumstances is backdated to 6 April 2000.

IR press release 59 of 15 March 2001 - Payroll Briefing 199 - 17 April 2001