Clarification: NI treatment of payrolled Benefits in Kind

28 June 2021

A clarification piece on National Insurance and payrolling of Benefits in Kind.

In the June 2021 edition of the CIPP’s Professional magazine, an article discussing payrolling of Benefits in Kind stated*:

“employee benefits are reported in real time, and tax and class 1A NICS applied to them at the same time they are received.”

The CIPP recognises that this statement could be misleading and apologise for any confusion caused.  For clarity, when benefits are processed through the payroll, they are subject to tax but not class 1A NI. However, by payrolling BIKS employers could (and maybe should) calculate, charge and accrue in the organisation’s financial accounts a cost/liability for the amount of class 1A NICs due. 

The only pay subject to Class 1A NICs from the employer in real time are termination payments that exceed £30,000 and sporting testimonials of more than £100,000. Class 1A NICs on all benefits in kind are, payable on 19th or 22nd July (depending on the payment method) in the year following the tax year the benefits were provided in.

CIPP comment

Whilst Class 1A NICs are not currently payable on benefits in kind in real time, is this something that could change going forward? The ability to pay Class 1 A NICs in real time has been proven with the amendments to termination payments and sporting testimonials. This could encourage more businesses to start payrolling benefits by removing the requirement to submit a P11D(b) each year.

*On page 27, penultimate paragraph in column two

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