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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 1 NICs : Earnings of employees and office holders : Council Tax, water or sewerage charges : Employer pays Council Tax, or water or sewerage charges for relocated employee

Where an employee relocates on or after 6 April 1998, if the employer pays the employee’s Council Tax, water or sewerage charges, the payment is earnings and NICs are due. The payment can not be disregarded under regulation 25 and paragraph 2 of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001 [exclusion for relocation expenses]. This is the case even where the employee has moved to an area where the Council Tax or water or sewerage charges are higher and the employer is paying the increase as part of a relocation package.

Where an employer is paying the increase in Council Tax, or water or sewerage charges of an employee who relocated prior to 6 April 1998 and who moved to similar accommodation, for example from a two bedroom bungalow in one area to a two bedroom bungalow in the other area, any payment the employer makes towards the increase in the charges may be excluded from NICs but only if there has been no change in the terms of the relocation package (either to pay a new allowance or to increase the amount of an existing allowance).

If the employee relocated before 6 April 1998 but moved to accommodation of a higher standard, for example from a semi-detached house in one area to a detached house in the other area, only the increase which would have been payable if they had moved to similar accommodation is capable of being excluded from NICs. As in the above example, this will only be the case where there has been no change in the terms of the relocation package.

For further details about relocation payments see NIM06110.