850.The new measures contain provisions which are intended to make all non-cash earnings received by directors or employees earning £8,500 or more per year subject to Class 1A (employer-only) NICs, unless they are already subject to Class 1 NICs, or Class 1B NICs (if they are minor benefits which are included in a PAYE Settlement Agreement, an administrative arrangement under which an employer accounts directly to the Revenue for tax and NICs on minor or irregular payments).
851.The extended Class 1A charge follows the shape of the existing charge on car and fuel benefits. The Class 1A due will be calculated using the valuation figures already required for tax purposes which an employer enters on a P11D form – a report to the Inland Revenue of the value of benefits in kind provided throughout the tax year* to each employee. This is intended to keep extra reporting requirements to a minimum.
852.The new measures provide powers for Treasury Ministers to make regulations to except particular items or reduce the Class 1A liability where appropriate. The sections also give powers to prescribe penalties for failure to pay Class 1A NICs correctly and other matters, such as dates and forms of records, surrounding collection of the NICs.
853.The Act also includes measures to move the liability for Class 1A NICs on benefits in kind provided by a third party from the direct employer of the recipient to the third party provider. Typically, this would arise where a manufacturer wishes to reward or incentivise the salespeople in retail outlets that sell his products, for example by providing them with holidays, goods or sometimes non-cash vouchers. The staff are likely to be employed by the retailer, not the manufacturer. Currently, the employer is liable for NICs on these benefits, possibly without his knowledge, and without any involvement in their provision. In general, the third parties have indicated their willingness to meet NICs liabilities of providing incentive awards, as they can do for tax.
854.The measures in the Act provide a mechanism to do this, by moving the liability for the Class 1A NICs on provided benefits and any related tax to that third party. This new liability is to be a voluntary commitment for the tax year 2000-2001. If the third party chooses not to pay the Class 1A NICs, the liability will rest with the employer, but in future tax years, the liability will be compulsory for the third party.
855.To remove all need for the employer to be involved, regulations came into force on 6 April 2000 to make non-cash vouchers that are provided by a third party liable to Class 1A NICs, rather than Class 1 NICs as at present (SI 2000/761 in GB and 2000/758 in Northern Ireland).
856.A further provision allows any emolument received from employed earner’s employment which is subject to Schedule E tax also to be treated as earnings for National Insurance. This is intended to be used to clarify the NICs treatment of items bought using a company credit card or similar form of purchase. It could also be used for tax/NICs alignment, such as to introduce the NICs regulations relating to the proposed new all-employee share plan.
Part IV: National Insurance Contributions Background Benefits in kind