Class 1 NICs: Earnings of employees and office holders: Eye tests and the provision of glasses
The ever-increasing use of computer technology within all areas of employment means that the question of NICs liability has arisen about payments made by employers for eye-sight tests and the provision of glasses and contact lenses.
There are two distinct aspects to this question:
- When an employee who is required to use display screen equipment, usually a Visual Display Unit (VDU), takes an eye-sight test, there is no NICs liability on the charge. This applies regardless of whether the employer or employee arranges the test.
- If the employer contracts with the optician, it is they who are responsible for the payment so no liability for Class 1 NICs arises because the payment will be a payment in kind. Similarly, no liability for Class 1A NICs arises because the cost of the test is not a chargeable benefit for the purposes of tax. See NIM13000 for guidance on the general principles in respect of Class 1A liability.
- If it is the employee who arranges the test and the employer reimburses them, then by virtue of regulation 25 and paragraph 9 of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001 [previously regulation 19(4)(b) of the Social Security (Contributions) Regulations 1979] you can disregard the payment, as Health and Safety legislation considers an eye test to be an expense incurred in relation to the employment.
- If, because of the eye test, it is found that the employee needs glasses or contact lenses solely for use with the display screen equipment they use in the course of their official duties, then no liability arises on any payment. Again, for the reasons outlined above, this applies regardless of whether the employee or employer pays for the glasses or contact lenses.
If, however, the test identifies a general need for glasses, and as well as the special prescription for VDU use the employer pays for or reimburses the whole bill, liability for Class 1 NICs arises on the amount which exceeds the VDU-related prescription. If the employer makes arrangements for the optician to supply the required glasses to the employee, this will be disregarded in relation to Class 1 NICs under the payment in kind provisions (regulation 25 and paragraph 1 of Part II of Schedule 3 to the Social Security (Contributions) Regulations 2001) but the provision of the glasses will be liable for Class 1A NICs in accordance with the general principles in NIM13000.
As there will be a need to identify that part of the prescription which relates specifically to VDU use, employers need to be reminded that it is advisable to keep itemised receipts for both the eye test and the prescription.