NIM06230 - Class 1 NICs: Expenses and allowances: Tool allowances

If an employee is given an allowance to purchase tools and the tools are available to the employee for private use, the allowance is earnings (see NIM02010 for guidance on the meaning of ‘earnings’) and it will not be able to be excluded as a business expense. Class 1 NICs will therefore be due.

Where the tools are not available to the employee for private use, then the allowance will be excluded from the calculation of earnings as a business expense by virtue of regulation 25 and paragraph 9 of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004) (previously regulation 19(4)(b) of the Social Security (Contributions) Regulations 1979).

See NIM05020 for general guidance regarding business expenses.