Potential to claim overpayments of Class 1A National Insurance

HMRC has confirmed there is scope for employers to make a claim for refunds of Class 1A National Insurance (NI) already paid on benefits with which employees or directors had a mix of both business and private use. This opportunity only applies for the tax years 2003/04 to 2005/06 inclusive.

Any potential refunds are due to a discrepancy in the Social Security Regulations for the three tax years. For income tax purposes, where an employee or director is provided with a benefit for both private and business use, then a benefit in kind charge will arise on the private use element.

The difference in the Social Security treatment is that Class 1A NI is due on the full amount of benefit, without any allowance relating to the business element.

HMRC’s position in tax years 2003/04 to 2005/06 was challenged at a tribunal. The taxpayer was allowed to calculate Class 1A NI on the provision of a helicopter with both private and business use so that Class 1A NI only applied to the private use element. More common examples of benefits with mixed use may be any employer-owned assets made available to employees, or bills for services that employees use where the contract is in the name of the employer. Specific changes have now been made to the legislation and so Class 1A will be due on the full value of the benefit regardless of the level of business use.

However, there remains an opportunity to make a claim for a refund of Class 1A NI for the years 2003/04 to 2005/06. The deadlines for submitting claims are:

· 5 April 2011 for 2003/04

· 5 April 2012 for 2004/05

· 5 April 2013 for 2005/06.

Should you have any queries or believe you may be in a position to make a claim then please contact Nick Bustin on 020 7063 4277, or your usual Mazars contact.