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  • Refund applications invited for Class 1A National Insurance Contributions (NICs) paid in respect of certain overseas holiday homes purchased through a company

Refund applications invited for Class 1A National Insurance Contributions (NICs) paid in respect of certain overseas holiday homes purchased through a company

Background

The Finance Act (FA) 2008 introduced new provisions to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA): sections 100A and 100B. These provisions effectively provide an exemption from the living accommodation tax charge where living accommodation outside the UK is provided by a company for a director or other officer of the company (D) or a member of D's family or household where all of the following apply:

  • the company is wholly owned by D or D and other individuals (and no interest in the company is partnership property),
  • the company's main or only asset is a relevant interest in the property
  • its only activities are ones that are incidental to its ownership of that interest

The new legislation was treated as having always had effect. In other words, the new legislation meant that since the coming into force of these provisions in the Finance Act 2008 a charge to Income Tax on the benefit provided through a qualifying overseas holiday home has never existed. As a consequence any liability to Class 1A National Insurance contributions, which was due on an amount equivalent to the general earnings charge in ITEPA, was also removed from 21 July 2008. At that time HM Revenue & Customs (HMRC) advised that refunds of tax could be claimed on the basis that the living accommodation tax charge was never intended to apply in these circumstances and the new legislation is treated as always having had effect.

However the same wasn't the case for Class 1A National Insurance contributions (employer only). In the case of overseas holiday homes, it remained the case that for the years prior to the enactment of Finance Act 2008, Class 1A National Insurance contributions remained due on the benefit in kind chargeable to Income Tax. HMRC published Regulations on 17 March 2011 that align the National Insurance contributions position with that for Income Tax - The Social Security (Contributions) (Amendment No. 3) Regulations 2011 (SI 2011/797). This means that it is now possible to claim a refund of Class 1A National Insurance contributions in the same way as it was possible for Income Tax. A refund of Class 1A National Insurance contributions can be claimed where contributions have been paid and an officer of HMRC is satisfied that the contribution was paid on the same amount treated as earnings that are now exempt under the relevant legislation in ITEPA.

Refunds

Any individual who can show that they have paid Class 1A National Insurance contributions for any year before 2008-09 on the benefit of living accommodation which qualifies for exemption in accordance with sections 100A and 100B of ITEPA should write giving the information listed below to:

HM Revenue & Customs
Customer Operations PAYE Employer Office
BP4009
Chillingham House
Benton Park View
Longbenton
Newcastle upon Tyne
NE98 1ZZ

Information to be provided:

  1. name, address, National Insurance number and/or Unique Taxpayer's Reference
  2. if agent acting – agent's name and address
  3. details of the living accommodation outside the UK - address, type of property, uses made of the property
  4. details of the company through which living accommodation outside the UK is provided including name, address, nature of company/entity, place of incorporation, ownership and activities
  5. an explanation of why they consider that the exemption applies
  6. the years for which Class 1A National Insurance contributions have been paid on the benefit of this accommodation
  7. evidence that the benefit of the accommodation in question has been taxed – acceptable evidence would include for each year copies of one or more of the following documents which clearly show the benefit as taken into account as taxable income:
    • assessments/self-assessments
    • P11Ds and P11D(b)
    • correspondence with HMRC or the former Inland Revenue

Note that the above list is not intended to be exhaustive. HMRC will consider any other documentary evidence in the individual's possession that the individual believes can show that the benefit has been taxed as earnings and Class1A National Insurance contributions has been paid on the same amount treated as earnings.

Time limit for making a refund claim

Any application for a refund in these cases must be made in writing on or before 6 April 2015.

HMRC will take action to identify those customers who have previously claimed refunds of tax and Class 1A National Insurance contributions and arrange to refund the Class 1A National Insurance contributions already paid. However, if you wish to submit details of your original claim again please quote any reference number that you were given previously and send it to the above address.