NIC proposals could hit company car drivers
29th March, 2016

The Office for Tax Simplification (OTS) has put forward a series of proposals for simplifying national insurance and aligning it more closely with income tax.

In its review, which was commissioned by the Chancellor at last year’s Summer Budget, the OTS has made a number of recommendations, one of which is to bring taxable benefits in kind into Class 1 NICs (National Insurance Contributions) and abolish Class 1A NICs.

If the government were to accept this particular suggestion, it would make employees liable for national insurance as well as income tax on company car and fuel benefits for the first time.

The OTS acknowledges that whilst its proposals would create a system that was simpler and easier to administer, it would also result in ‘winners and losers’. The OTS estimates that applying Class 1 NICs to taxable benefits could earn the government an extra £435m per year, but has suggested that the cost of this extra tax liability could be offset by a "general reduction in rates".

The OTS says that harmonising the NIC treatments of benefits in kind will take time and that further work would need to be undertaken to "fully explore the impact on individuals, businesses, the Exchequer and the administration of a move to alignment".