Class 1A National Insurance contributions
Class 1A contributions were paid
by employers on car and car fuel benefits prior to 6th April 2000. The Child
Support, Pensions and Social Security Bill 2000, which received Royal assent
on 28th July 2000, contained provisions extending Class 1A National Insurance
contributions retrospectively from 6th April 2000. Class 1A National Insurance
contributions are now payable on most benefits in kind and are paid by the employer
not the employee.
Class 1A National Insurance contributions do not count towards any state
benefits.
Class 1A National Insurance contributions on Benefits in kind
Only employers pay Class 1A contributions, there is no employee contribution
payable. The employer must consider Class 1A National Insurance contributions
with regard to benefits provided to and on behalf of directors and employees
for whom they need to complete a P11D.
The following conditions must apply for Class 1A contributions to be payable:
- the employer and employed earners must satisfy the Residence and Presence
conditions in Great Britain
- the employment from which the benefit in kind is derived must be employed
earner’s employment to income tax under the Income Tax (Earnings and
Pensions) Act 2003 on an amount of general earnings,
- the benefit must be provided to an employee who is earning at a rate
of £8,500.00 or more per year, or a director,
- the benefit must not already attract a Class 1 National Insurance contributions
liability.
When are Class 1A National Insurance contributions not payable?
The employer need not charge Class 1A National Insurance contributions on
benefits that are
- exempt from income tax
- taxable but specifically exempted from Class 1A National Insurance contributions
liability
- covered by a dispensation
- included in a PAYE Settlement Agreement
- returned on form 9D
- already liable for Class 1 National Insurance contributions
- provided exclusively for business use or, for certain benefits, the private
use is insignificant.
Special cases
The circumstances under which Class 1A National Insurance contributions
may be reduced, or the liability may lie with another, are covered in booklet
CWG5. and booklet CA33
(PDF 214K). They give further guidance on
- benefits provided by third parties
- benefits provided to an employee by more than one employer
- benefits provided to employees who work abroad
- shared cars and cars provided to disabled drivers.
How is Class 1A National Insurance contributions worked out?
Class 1A contributions are worked out on an annual basis using the cash equivalent
of the benefit. The same rules for calculating the cash equivalent of the
benefit are used for both tax and Class 1A National Insurance contributions.
The amount of Class 1A National Insurance contributions due is calculated
from the information recorded on the forms P11D. The brown boxes on the P11D
show those benefits that attract Class 1A and the employer works out the amount
due by
- adding together the figures shown in the appropriate Class 1A boxes,
and
- multiplying the total figure, after any adjustments, by the Class 1A
percentage rate of 12.8%.
How is Class 1A National Insurance contributions reported?
The amount calculated must be declared using form P11D(b). This form is also
used to adjust the total amount of Class 1A National Insurance contributions
due after the P11D has been completed if an error is discovered. A penalty
is charged if the P11D(b) is not received by 19 July following the tax year
end, and a form P11D(b) must still be completed even if the employer has no
Class 1A liable benefits. If the employer has already indicated on the P35
that no P11D(b) is due, they do not have to send this form.
How is Class 1A National Insurance contributions paid?
Class 1A National Insurance contributions should be paid by 19 July following
the end of the tax year. Interest will be charged on payments made after that
date. Special payslips are provided in the first week of April and should
be used if payment is made by any other method than direct debit.
