HMRC has recently updated its 2017 guidance on Class 1A national insurance contributions (NIC) on benefits-in-kind(BiK), formerly known as booklet CWG5.
HMRC’s guide tells you what you need to know and do about Class 1A NIC. It explains when Class 1A NICs are due and how they are worked out, reported and paid.
In more detail, the guide:
Paragraphs 43 to 53 explain some of the main terms used in the guide; and Appendix 1 lists the most common taxable benefits and expenses and explains which are liable for Class 1A NIC.
The update comprises additional guidance on optional remuneration arrangements (OpRA) (which includes salary sacrifice and where a cash allowance is exchanged for a BiK) in para 9 in Part 3 and a new paragraph at the beginning of Part 5. This guidance cross refers to further guidance about OpRA in Appendix 12 of booklet 480: Expenses and benefits - a tax guide.
The new rules for BiK provided via OpRA came into force on 6 April 2017.
Where a BiK is chosen instead of some form of cash pay, the value of the BiK and the amount therefore liable for NIC is (in broad terms) the greater of the amount of salary or cash pay foregone and the value of the BiK under the normal BiK rules, ignoring any amount made good.
For most benefits provided through OpRA, BiK that were exempt are no longer exempt.
The following BiK are not affected by the new rules:
Transitional provisions apply for a limited period. Subject to certain specific exceptions, OpRAs entered into before 6 April 2017 continue to be subject to the normal BiK rules until the earlier of:
Those exceptions are cars with CO2 emissions of more than 75g/km, living accommodation and school fees where the latest date for transitional protection ending is 6 April 2021.