Bearing in mind the general rule, outlined in NIM02192, that it
should normally be assumed that a director or employee purchasing
goods/services is making the purchase on his own account, it must
also be remembered that many directors and/or employees may be
authorised to act on their company’s behalf. This includes
making contracts, which in this context means an agreement entered
into by the company to purchase particular goods and/or services,
with the director/employee acting as an agent on behalf of the
company.
If an authorised director/employee buys goods as an agent
for their employer,
and makes it clear in advance that they are acting as such
an agent, it is the employer who is making the contract to
purchase the goods, not the agent. Upon completion of the sale,
ownership of the goods, together with the liability to pay for
them, passes to the employer, not the agent.
When considering the liability for NICs, you must determine
whose obligation it is to pay for the goods and/or services in the
first place. The method of payment by which that obligation is
discharged is of secondary importance.
If it is established that a purchase was made by an employee
acting as an agent for the company, there is no liability for Class
1 NICs regardless of how the bill is settled.
If the company, as owner of the goods and/or services
purchased by the director/employee acting as its agent,
subsequently decides to make them available or transfer them to
that agent, the transfer constitutes a payment in kind. As such, by
virtue of regulation 25 and paragraph 1 of Part II of Schedule 3 to
the Social Security (Contributions) Regulations 2001 there is no
liability for Class 1 NICs. There may, however, in accordance with
the general principles outlined in
NIM13000, be a liability for Class 1A
NICs.
See
NIM02194 for examples.
