For NICs purposes, the way in which an employer provides something to an employee will normally determine whether a
As any amount of general earnings, or anything treated as
general earnings for tax purposes, (before 6 April 2003 –
emoluments chargeable to income tax under Schedule E) may attract a
Class 1A NICs liability if there is no existing Class 1 or Class 1B
NICs liability, it is important to establish the correct NICs
liability on anything provided to an employee, see
The starting point for this is to establish whether the item provided has been disregarded from earnings for Class 1 NICs purposes. If the item has been disregarded, it is likely to attract a Class 1A NICs liability unless the item
To do this it is necessary to consider the wording of the
legislation that disregards certain payments from earnings on which
Class 1 NICs are due and in particular the regulation which
disregards benefits in kind. The relevant legislation is Regulation
25 and paragraph 1 of Part 2 of Schedule 3 to the SS(C)R 2001.
Although the wording of the NICs legislation talks in terms of a
‘payment in kind’ this is taken to be the equivalent of
the tax expression ‘benefit in kind’.
Subject to specific exceptions, paragraph 1 of Part 2 of Schedule 3 provides that
”A payment in kind, or by way of the provision of services, board and lodgingsor other facilities is to be disregarded in the calculation of earnings.”
The payments in kind which are not disregarded are those assets
listed in Parts 3, 4 or 5 of Schedule 3 to the SS(C)R 2001 and are
those that have been specifically regulated into Class 1 NICs
There is no statutory definition for NICs of the term ‘payment in kind’. As a result, it is necessary to draw a distinction between items which, when given to an employee, can be turned into cash only by sale and which depend upon there being a willing buyer and mutually agreed price, and items which can be turned into cash by surrender. Items which are
Although both the television and the Premium Bonds are general earnings chargeable to income tax under ITEPA 2003 (before 6 April 2003 - emoluments chargeable to income tax under Schedule E), for the purposes of NICs, the
The distinction drawn here should not be confused with an employee’s ability to give up a benefit in exchange for additional cash, which is explained at SE00570 and NIM16650.