8 February 2013    |    Uncategorized

National Insurance not due on BiK?

Where a Benefit in Kind arises then there is both a tax charge and a Class 1A National Insurance cost. But can these be waived?

If the cost of the Benefit in Kind is refunded by the employee (or director) then the tax charge lapses, by long established law and practice.

But what about the National Insurance liability?

The view of HMRC has long been that reimbursement after 19 July cannot cancel a Class 1A liability.

A recent tax case has decided that this approach is wrong, and that reimbursement of the cost means that a Class 1A charge cannot arise, as the cost was never incurred by the company. This seems blindingly obvious, but it took a determined taxpayer to prove that this was the wrong approach.

Whilst we would still recommend repaying the cost before 19 July, if it is repaid at any point, then Class 1A cannot arise, and should be vigorously rebuffed.

If in doubt, quite the concise judgement in re Marcia Willets Ltd to the Inspector.

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