NIM16002 - Class 1A National Insurance contributions: Special Class 1A NICs cases: Cars provided for private use: General

Class 1A NICs have been payable on the taxable benefit of a provided car since 6 April 1991. Although the extension of Class 1A NICs to most taxable benefits, from 6 April 2000, changed the way in which the total amount of Class 1A NICs are calculated, the rules for determining whether Class 1A NICs are payable on provided cars remained largely unaltered.

The following paragraphs explain how Class 1A NICs are calculated on provided cars from 6 April 2000. For guidance on Class 1A NICs on provided cars and car fuel before 6 April 2000 see NIM17500.

Class 1A NICs on cars provided on or after 6 April 2000

Class 1A NICs liability arises on the benefit of a car provided on or after 6 April 2000, if the car is

• made available to

• made available by reason of the director’s or employee’s employment; and
• made available for the private use of either

• chargeable to income tax under ITEPA 2003 (before 6 April 2003 – under Schedule E).

As the benefit of a car provided for private use attracts a car benefit charge under the rules of Chapter 6 of Part 3 of ITEPA 2003 (before 6 April 2003 - section 157 of ICTA 1988), Class 1A NICs are payable on the cash equivalent of the benefit, ascertained in accordance with section 120 of ITEPA 2003 (before 6 April 2003 – section 157 and Schedule 6 of ICTA 1988).

The rules for calculating the cash equivalent of a car provided for private use are explained at EIM23100 (before 6 April 2003 - SE23000) onwards and apply equally to Class 1A NICs.

For tax years where the cash equivalent of a provided car is calculated by reference to the amount of business mileage undertaken by the employee, the rules for determining whether the mileage is business mileage are the same for both tax and NICs. These rules are explained at SE23080 onwards.

Although Class 1A NICs are calculated on the cash equivalent of a car determined for tax purposes, there are a number of special cases where either

• Class 1A NICs are not payable on a provided car, despite a car benefit charge arising; or
• the amount of Class 1A NICs due is calculated under special rules.

These special cases are listed at NIM16001 and, with the exception of NIM16003, the guidance applies equally to Class 1A NICs due from 6 April 1991.

• Definitions used in relation to cars provided for private use, including those used to define a car, are the same for both tax and Class 1A NICs. Relevant definitions are provided in the Employment Income Manual and before 6 April 2003 Schedule E manual.

For guidance on the treatment of fuel provided for use in a car which attracts a car benefit charge, see NIM16170 onwards.