PSA3010 - National Insurance Contributions and PAYE Settlement Agreements

General

From 6 April 1999 Class 1B National Insurance contributions were introduced to align the NICs treatment of items included in a PSA with the tax treatment. Following this change an employer who enters into a PSA is liable for the payment of Class 1 B NICs in addition to their liability to tax under the PSA. The legislation relating to Class 1B NICs is shown at PSA3020

Class 1B NICs are payable on

• items within a PSA that ordinarily attract a Class 1 PSA3040 or Class 1A NICs liability, PSA3030

and

• the total tax payable under a PSA

Class 1B NICs replace any Class 1 or Class 1A NICs liability attached to the benefits and expenses included in a PSA for tax purposes

Only items that attract a tax charge can be included in a PSA. You cannot use a PSA

• where there is NICs only liability, or
• to cover elements which have NICs only liability

More detailed information about Class 1B NICs can be found in the National Insurance Manual at NIM18000 onwards