The extension of Class 1A NICs to all taxable benefits in kind was announced in the last Budget.
This measure, according to the government, will align more closely the tax and employers' NICs treatment of benefits in kind from April 2000.
It has now announced that, as part of this change, tax and National Insurance Contributions (NIC) charges on some employee benefits in kind, including welfare counselling, will be exempted.
In response to a Parliamentary Question on Friday the Paymaster General Dawn Primarolo announced: 'The extension of Class 1A NICs has been structured aroundthe existing tax reporting system to minimise any extra work for employers.
'Employers will, for Class 1A purposes, use the valuation figures for benefits that they already put on each employee's P11D form for tax purposes. The P11D will be clearly marked to make it obvious which figures to use to calculate the Class 1A liability.'
'The first reports on, and payments of, the extended Class 1A contributions will be due in July 2001. Full guidance on how the new arrangements will work in practice will be made available to employers shortly.
In addition, to reflect developments in modern working practices and reduce reporting requirements on employers the Government will be exempting a number of benefits from both tax and NICs. The benefits to be exempted are:
small amounts of private use by an employee of items provided by the employer for the employee's work;
qualifying beneficial loans; and
general welfare counselling provided by an employer.
The Inland Revenue are also making it clear that an extra- statutory concession, which exempts the benefit of subsidised meals provided to employees in certain circumstances, applies to light refreshments as well.'
The Chartered Institute of Taxation last week warned employers will be caughtout by the new rules and will end up paying fines because the government had not revealed how the new system of paying employers' national insurance on employee benefits will work.
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