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HMRC internal manual

National Insurance Manual

Class 1 NICs : Earnings of employees and office holders: Customary payments

If there is no legal obligation to make a payment because it is not provided for in the contract of employment (see NIM02040), it will still be liable for NICs if there is a custom in the particular employment of making such payments.

An example of such a payment might be a retirement gratuity payable to employees of a particular grade within a company. If the company is in the habit of always making payments to employees within that grade upon their retirement, it will be well-known among those employees that such a payment will be available when they retire. The payment therefore forms part of the terms under which they provide their services and will be earnings for the purposes of NICs (see NIM02010).