If you are an employee, you`ve probably heard of the term „working rule agreements” (WRAs) and how they can affect your tax and National Insurance contributions (NICs). In this article, we will explore what WRAs are, how they work, and how they impact both employees and employers.
What are HMRC Working Rule Agreements?
HMRC Working Rule Agreements (WRAs) are special agreements between an employer and HM Revenue and Customs (HMRC) which allow the employer to pay a reduced rate of NICs for certain employment situations. These agreements are also referred to as „dispensations.”
A working rule agreement is an agreement between an employer and HMRC about the treatment of expenses and benefits provided to employees. The agreement outlines how these expenses and benefits should be treated for tax and NIC purposes.
How do WRAs work?
In order to benefit from a WRA, an employer must make an application to HMRC detailing the circumstances of the expenses or benefits, and the reasons why the expenses or benefits are necessary for the performance of an employee`s duties. The agreement is then reviewed and approved by HMRC.
Once a WRA is in place, the employer can pay expenses or benefits to employees without having to deduct tax and NICs. This can result in significant savings for employers, as they are not required to pay the full amount of NICs that would normally be due. Additionally, WRAs can provide employees with greater flexibility when it comes to expenses and benefits, as they are not subject to as many tax and NIC restrictions.
What are the benefits of WRAs for employees?
For employees, WRAs can provide a number of benefits. Firstly, they can help to reduce the amount of tax and NICs that an employee has to pay, as certain expenses and benefits are exempt from these deductions. Secondly, WRAs can help to streamline the expenses and benefits process, making it easier for employees to claim expenses and benefits without having to worry about complex tax rules. Finally, WRAs can help to increase job satisfaction, as employees are able to access a wider range of benefits and expenses.
What are the benefits of WRAs for employers?
For employers, WRAs can provide a number of benefits. Firstly, they can help to reduce the amount of NICs that an employer has to pay, which can result in significant savings over time. Secondly, WRAs can help to streamline the expenses and benefits process, reducing the administrative burden on employers. Finally, WRAs can help to attract and retain employees, as they offer additional benefits and flexibility.
In conclusion, HMRC Working Rule Agreements are a useful tool for both employees and employers. They help to reduce tax and NICs, while also streamlining the expenses and benefits process. If you are an employer, it is worth exploring whether a WRA would be suitable for your business. And if you are an employee, it is worth asking your employer whether they have a WRA in place and how it might benefit you.