NIM13140 – Class 1A National Insurance contributions: Liability for Class 1A NICs: Benefits liable for Class 1A NICs

Class 1A NICs legislation does not specify which benefits in kind are liable for Class 1A NICs. Instead, it provides for any general earnings chargeable to income tax under ITEPA 2003, (before 6 April 2003 - emoluments chargeable to income tax under Schedule E), to attract Class 1A NICs liability unless the general earnings

• already attract either a Class 1 or Class 1B NICs liability; or
• are otherwise exempt from Class 1A NICs.

The main benefits which attract Class 1A NICs liability are charged to tax under the benefits code (Chapters 2 to 11 of Part 3 of ITEPA 2003) (before 6 April 2003 – section 154 ICTA 1988) and can include

• assets transferred to the employee, such as property and goods, unless these are readily convertible assets, see NIM04002
• assets placed at the employee’s disposal, such as the use of an aircraft or boat
• private medical insurance
• services, such as free use of a private club, or a telephone line.

Other benefits which attract Class 1A NICs liability charged to tax under the benefits code include (before 6 April 2003 – section 154 ICTA 1988)

• interest free and low interest loans – section 173 of ITEPA 2003 (before 6 April 2003 – section 160 ICTA1988)
• living accommodation – section 97 of ITEPA 2003 (before 6 April 2003 – sections 145 and 146 ICTA 1988)
• certain relocation benefits and expenses – section 287 of ITEPA 2003 (before 6 April 2003 - section191A ICTA 1988)
• company cars provided for private use - section 114 of ITEPA 2003 (before 6 April 2003 sections 157 and 158 of ICTA 1988)
• company vans provided for private use – section 154 ITEPA 2003 (before 6 April 2003 section 159AA of ICTA 1988).

Although these are the main taxable benefits which attract a Class 1A NICs liability, the absence of a definition within Class 1A NICs legislation means that it is not possible to supply a definitive list of benefits. The potential exists for anything an employer provides to, or for, his employees to be a benefit, see NIM13170.

A list of the most commonly provided benefits which attract a Class 1A NICs liability is contained at NIM13150 but that list is not exhaustive.