NIM13070 – Class 1A NICs: Liability for Class 1A NICs: Conditions to be satisfied for liability to arise: Benefit is, or is treated as, an emolument chargeable to Schedule E Income tax

Section 10(1)(a) SSCBA 1992

In order for a Class 1A NICs liability to arise the benefit must be an emolument or be treated as an emolument, chargeable on the earner to income tax under Schedule E.

Most benefits chargeable under Schedule E are emoluments or treated as such. Full guidance is contained in the Schedule E manual. That guidance applies equally for the purposes of Class 1A NICs.

Only where the benefit is chargeable to income tax under Schedule E as an emolument can a liability for Class 1A NICs arise.

It is important here to draw a distinction between the words 'charged' and 'chargeable'. In some cases tax may not be charged but the benefit remains chargeable to tax. An example of this occurs where the conditions of a Double Taxation Agreement mean that the UK gives credit for another country’s tax.

For the purposes of Class 1A NICs it is sufficient for an item to be chargeable to tax in the first instance, tax does not have to be paid.