Q. My company regularly pays expenses on my behalf which I later reimburse the company for so I have a variable outstanding debt with the company during the year. I‘ve read that if the total of that debt exceeds £10,000 at any point the company must pay NIC at 13.8% on the entire amount. Is that correct?
A: The company must pay NIC at 13.8% on the value of the deemed interest on the outstanding debt, which is treated as a taxable benefit for you, assuming you don‘t actually pay interest on that debt.
While the total debt is less than £10,000 there is no taxable benefit in kind, so it’s only periods during which the debt exceeds £10,000 when the nominal interest needs to be calculated at the official rate (currently 2.25%).
If the debt was £12,000 for 3 months, the benefit in kind would be: (2.25% x 12,000) x 3/12 = £67.50. As a 40% taxpayer you would pay tax of £27. The company would pay NIC at 13.8% on £67.50 = £9.32.
The information provided in this blog is for general informational purposes only and should not be considered professional advice. As far as we are aware, the content is accurate at time of publication. Torgersens assumes no responsibility for errors or omissions in the content or for any actions taken based on the information provided.
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