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HMRC internal manual

National Insurance Manual

Class 1 NICs : Earnings of employees and office holders: Credit card reward payments

Regulation 25 and paragraph 15 of Part X of Schedule 3 to the Social Security(Contributions) Regulations 2001

Third parties such as credit card companies, banks, and building societies pay cash rewards (usually in the order of £50) to employees of retailers every time they detect and withdraw lost or stolen credit cards, debit cards, or cheque guarantee cards.

No NICs have ever been collected in respect of these payments because it was originally believed that the payments did not arise from the employment. This was erroneous.

It has now been determined that the payments are earnings for NICs purposes in accordance with the principle established in the Hamblett v Godfrey case (see NIM02010).  From 26 July 2001, they are, however, excluded from NICs liability by virtue of regulation 25 and paragraph 15 of Part X of Schedule 3 to the Social Security (Contributions) Regulations 2001 (as amended by the Social Security (Contributions)(Amendment No.5) Regulations 2001).

You should not therefore include in gross pay any payment which a third party makes to an employee for identifying a lost or stolen credit card, debit card, or cheque guarantee card. This is the case even if the payment was made before the statutory exclusion was introduced.

The regulations only provide an exclusion in respect of payments made by a third party. A payment which an employer makes to one of their own employees for identifying a lost or stolen credit, debit, or cheque guarantee card will remain liable for NICs in the normal way.