NIM16002 - Class 1A NICs: 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 prior to 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:
- a director or
- an employee earning at the rate of £8500 or more a year including taxable expenses and taxable benefits; and
- made available by reason of the director’s or employee’s employment; and
- made available for the private use of either
- the director or employee or
- members of their family or household; and
- chargeable to income tax under Schedule E.
As the benefit of a car provided for private use attracts a car
benefit charge under the special rules of section 157 ICTA 1988,
Class 1A NICs are payable on the cash equivalent of the benefit,
ascertained in accordance with 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 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 NIM16001and, with the exception of NIM16003, the guidance provided 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 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.
