NIM13180 explains the importance of
establishing who it is that makes the contract with a supplier to
purchase or supply an item that an employee either has use or takes
ownership of. This will help determine whether Class 1 or Class 1A
NICs are due.
In cases where doubt exists about whether an employee has
received earnings subject to Class 1 NICs or been provided with a
benefit subject to Class 1A NICs, it is important to establish all
relevant facts. For the meaning of benefit see
NIM13171.
The payment by an employer of an employee’s personal
bill is not sufficient to render the payment a benefit for NIC
purposes. Many directors, particularly of small companies, arrange
for their personal bills to be paid by their employers. Often they
will arrange for the supplier to send a bill direct to their
employer’s address. Although the bill may have the
employer’s address on it and the provider may anticipate
payment from the employer, this does not necessarily mean that the
contract to supply the goods or service is with the employer.
In some cases it is necessary to check who it is that has
actually made the contract with the supplier. This is especially
important where a dispute arises and it is likely that a decision
under section 8 of the Social Security Contributions (Transfer of
Functions, etc.) Act 1999 is needed.
