The Office of Tax Simplification (OTS) has suggested a "pragmatic" cut to National Insurance Contribution (NICs) rates.
The cut would reflect the increased amount of Class 1 contributions following its recommendations to simplify the administration and taxation of employee benefits and expenses.
The move was one of several highlighted by the OTS in its report 'Review of employee benefits and expenses" released today, that could be taken by HM Treasury in response to its proposals.
As part of its review the OTS urged the government to further explore “the case for applying Class 1 NICs to all employee remuneration (whether cash or benefits in kind)”.
It recognised that this and several other suggestions could have a significant impact on tax receipts – potentially increasing and decreasing revenue for the Treasury.
The report explained: “We are well aware that a number of our proposals will have revenue impacts, possibly significant, for example:
- if all benefits are subjected to Class 1 NICs, that would naturally increase NICs take but that could be matched by a pragmatic cut in NIC rates;
- introducing a general trivial benefits exemption would cost the Exchequer some income, but would save considerable administrative effort all round;
- widening PSAs would potentially bring in some extra income for HMRC but would have some limited impact on taxpayers’ positions over benefit entitlements; and
- our proposals for travel expenses could involve a revenue cost, depending on which options are taken forward.”
