NIM14200 - Class 1A National Insurance contributions: Exemptions from Class 1A NICs: Benefits covered by a dispensation

Section 65 of ITEPA (before 6 April 2003 section 166 ICTA 1988)

Although benefits included in a dispensation might be general earnings (before 6 April 2003 – emoluments), no income tax is chargeable. Dispensations recognise that some expenses and benefits provided by employers cover business use only and that no tax is payable. The granting of a dispensation removes the burden from an employer of reporting such payments.

No Class 1A NICs liability arises on benefits included in a HMRC agreed dispensation. Section 10(1)(a) of the SSCBA 1992 is not satisfied, see NIM13070. This follows the same Class 1 NICs approach on expenses included in a dispensation.

Most types of benefit provided only for business use can be included in a dispensation. Common examples are

• business travel, for example, hotel accommodation
• subscriptions to professional bodies and learned societies approved by HMRC.

Dispensations only cover the circumstances for which they were issued and employers must report any change of circumstances affecting a previously agreed dispensation.

Further guidance on dispensations is available at

• EIM30050 (before 6 April 2003 – SE30050) onwards for tax; and
• NIM05500 for the general treatment of dispensations for NIC purposes.