NIM18080 - Class 1B NICs : Liability : Calculation : Example
Smith and Jones Ltd. has a workforce of 1,000 employees. All are
chargeable to tax during the tax year 2003/04 on benefits valued at
£50 per head.
800 employees pay tax at the basic rate and 200 pay at the
higher rate.
The value of items covered by the PSA which give rise to a
Class 1 and Class 1A liability is £50,000.
The tax and Class 1B NICs payable under a PSA for 2003/04 and
covering the whole workforce would be calculated as follows:
| Value of benefits provided to basic rate employees (800 x £50) | = £40,000 |
| Tax due @ 22% on £40,000 | = £8,800 |
| Gross up tax £8,800 x 100/100 – 22 | = £11,282.05 |
| Value of benefits provided to higher rate employees (200 x£50) | = £10,000 |
| Tax due @ 40% on £10,000 | = £4,000 |
| Gross up tax £4,000 x 100/100 – 40 | = £6,666.67 |
| Total Tax Due | = £17,948.72 |
| Value of items liable for NICs | = £50,000 |
| Class 1B NICs Due (£17,948.72 + £50,000) x 12.8% | = £8,697.44 |
