HMRC internal manual

National Insurance Manual

NIM02205 - Class 1 NICs: Earnings of employees and office holders: Honoraria and similar payments

Section 3(1) Social Security Contributions and Benefits Act 1992

A true “honoraria” is generally a payment received by an office holder. It may only be a token payment rather than a commercial fee, but it is clearly a payment which results from holding the office. Such payments are “earnings” for the purposes of section 3(1) SSCBA 1992 and will be liable for Class 1 NICs.

Employers may sometimes give “ex gratia” payments, similar to “honoraria”, to employees to recognise the fact that they have been involved in certain activities not arising from their employment, and that, in relation to those activities, they will not receive any other form of reward.

For example, a car worker who served in an unpaid capacity as the works sports club secretary and received a payment from the employer in recognition of the valuable service he had given to the club.

There will be a liability for Class 1 NICs in these circumstances because the payment will derive from the employment and will therefore be “earnings” for the purposes of NICs.

See NIM02010 for general guidance on the meaning of “earnings”.

Prior to April 2003 guidance contained in booklet CWG2 Employer’s Further Guide to PAYE and NICs indicated that no NICs liability would arise on payments of honoraria. This was incorrect. The guidance was changed with effect from April 2003 to correctly reflect that honoraria are liable for the payment of both tax and NICs.

In view of the incorrect guidance prior to April 2003 you should not seek to collect NICs on payments of honoraria made prior to that date even though a liability will exist.