class 1a NIC

class 1a NIC

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A company employs someone who spends most of their time on director's personal affairs. So this person's salary is declared as a benefit on P11d and also class 1a NIC is paid on the salary. At a PAYE inspection HMRC also demand class1a on the employer's NIC on the salary, on the basis that this is the total cost of employing the person. So they want class 1 and class 1a on the same salary - does anyone have any experience of this, as it seems like they want "double bubble" here.

Thanks for your help!!
john williams

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By AnonymousUser
30th Apr 2007 13:21

I don't see what the problem is, frankly.

The cost of employing the servant is a benefit in kind. It is therefore subject to Class 1a NIC. This means the full cost of employing him/her; including secondary Class 1 NIC, plus any other costs such as use of subsidised facilities, attendance at Christmas party, pension contributions etc that you would normally regard as tax free. I'll be surprised if HMRC don't ask about these things as well.

Why do you think that the company should pay less NIC than it is liable for?

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By neileg
30th Apr 2007 13:23

Not double bubble
The Class 1 is the employers NI arising on the employment of the person doing the work. The Class 1a arises out of the fact that the company pays for the employee instead of the director.

The Class 1 would still be payable if the employee was paid directly by the director, and the director would be paying this out of income that had been subject to NI already, both Er's and EE's. So the BIK route is an NIC saving, since there is only one lot of Er's and two lots of Ee's, compared with two lots of each if the director pays the employee.

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