NIM16010 - Class 1A NICs: Special Class 1A NICs cases: Cars provided for private use: Cash alternatives

Prior to 6 April 1995 it was sometimes argued that Class 1A NICs were not payable on cars provided to employees under cash alternative schemes.

To remove any uncertainty, new legislation - section 157A ICTA 1988 - was introduced from 5 April 1995. Section 157A ensures that a section 157car benefit charge operates in cases where an employer offers a cash alternative to a company car but the offer is not taken up. The effect of the legislation also served to confirm that where a cash alternative was offered but not taken Class 1A NICs were due.

From 6 April 1995, the NICs due on cars provided under a cash alternative scheme depend upon what the employee actually receives.

If the employee:

• has the benefit of a car, Class 1A NICs are due
• receives the cash instead, Class 1 NICs are due.
• From 6 April 2000, the same principle applies to cash alternative schemes which offer other benefits. If the employer
• provides the benefit, Class 1A NICs are due.
• provides cash in place of a benefit, Class 1 NICs are due.