As an employer, you may be liable to pay Class 1A National Insurance contributions for:

• Cars provided on the basis of employment to:
• Most directors
• Employees who are paid £8,500 or more a year, including taxable benefits and taxable expenses, if the car is available for their private use
• Fuel provided for private use in those cars

The Company Cars component allows you to record information about all company cars allocated to employees. This provides the payroll with the information it requires to calculate the Class 1A National Insurance contributions and taxable benefits.

The following infotype records need to be maintained for the payroll to correctly calculate the Class 1A National Insurance contributions to be paid by the employer and the deductions to be made from employees' earnings:

• Company Cars (infotype 0222)
• Company Car Unavailability (infotype 0225)
• Recurring Payments/Deductions (infotype 0014)
• Additional Payments (infotype 0015)

The Company Cars component provides the functionality required for calculating Class 1A National Insurance contributions in accordance with statutory requirements:

• Calculation of Class 1A National Insurance contributions using list prices

Taxation of car benefits was changed in 1993 from scale charges to a system based on the price of the car. The system therefore calculates National Insurance contributions (NICs) as a percentage of the cash equivalent of the benefit of the car made available for private use, which is determined from the price of the car in the year in which it was made available to the employee.

For the 1998/1999 tax year, the system calculates the car benefit as 35% of the price of the car including accessories, minus any capital contribution made, to arrive at the full car benefit. It then makes the necessary adjustments to calculate the net car benefit. Finally, it calculates the Class 1A National Insurance contributions as a percentage of the net car benefit. The rate for 1998/1999 is 10%.

• Calculation of Class 1A NICs for fuel provided for private use

An employee may be provided with fuel for private use of the company car. If this is the case, the system determines the fuel scale charge, which depends on:

• The engine size of the car
• Whether the car uses petrol or diesel

On the basis of the fuel scale charge, it calculates the Class 1A National Insurance contributions.

See also: