From April 2000, the majority of employees' taxable benefits in kind became subject to employers' Class 1A National Insurance Contributions (NIC).

Previously, this levy on employers only applied if cars and fuel were provided to employees for personal use. The new rules mean employers now pay 12.2% NIC on the value of most benefits provided.

The benefits subject to the charge include the provision of living accommodation, relocation costs (above the specified limits), private medical cover, cheap or interest free loans and some benefits provided by third parties. However, in his March Budget, the Chancellor announced that childcare provision by employers was to remain NIC free, although this exemption does not cover reimbursement of childcare costs by employers.

Employers should be aware that Class 1A NIC will now be due on benefits in kind unless they are specifically exempted. Exemptions may be available if assets are only provided for business purposes, or provided to employees (not directors) earning less than £8,500 per year. Expert advice will be needed to determine if the exemptions apply.

These changes will add costs to an employer's payroll and employers should now consider the implications on their approach to employee remuneration and reward.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.