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HMRC internal manual

National Insurance Manual

Class 1 NICs: Earnings of employees and office holders: Training and similar costs: Work-related employer funded training

Regulation 25 and paragraph 2 of Part VII of Schedule 3 to the Social Security(Contributions) Regulations 2001

Position from 6 April 1997

Legislation was introduced with effect from 6 April 1997 to exclude from earnings for Class 1 NICs purposes, any payment of, or contribution towards, expenditure incurred in providing work-related training which is excluded from tax by virtue of sections 250 to 254 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). Prior to the coming into force of ITEPA 2003, the equivalent tax exemptions were provided by virtue of section 200B, 200C, and 200D of the Income and Corporation Taxes Act 1988 (ICTA 1988).  See EIM01220 (previously SE01220), for guidance as to what constitutes “work-related training”.

Work-related training may be provided by any of the following methods:

  • in-house training
  • the employer contracting with a training company to provide the training
  • the employee paying for his own training and then being reimbursed by the employer.

The payments which can be excluded are:

  • the payment of fees, or the reimbursement of fees paid by the employee, for work-related employer funded training. Training could include developmental training such as Raleigh International and Outward Bound courses, as well as more traditional training courses.
  • travel and subsistence incurred in attending the training course.
  • the cost of multi-media and distance learning aids, books, practical training materials, and examination fees necessary for and registration of qualifications gained from the training, whether these are paid for by the employer or paid by the employee and later reimbursed by the employer.
  • the cost of additional care of children and other relatives incurred as a result of the employee attending the training course.
  • the costs incurred in connection with an assessment of what the employee has gained from the training – whether this is an examination or something else.

No Class 1A liability will arise in connection with benefits covered by sections 250 to254 ITEPA 2003 (previously sections 200B, 200C, and 200D ICTA 1988) because no tax liability exists. See NIM13000 for guidance regarding the general principles of Class 1A NICs liability.

For periods from 6 April 2003, see EIM12000 for further guidance on sections 250 to 254 ITEPA 2003.

For periods before 6 April 2003, see SE01200 for further guidance concerning sections 200B ,200C, and 200D ICTA 1988.

Position prior to 6 April 1997

Prior to the introduction of the specific legislation to exclude work-related employer funded training from Class 1 NICs liability, in-house training and contracts between the employer and a third party to provide training for employees was excluded from liability.  This was achieved by virtue of regulation 19(1)(d) of the Social Security (Contributions) Regulations 1979 [now regulation 25 and paragraph 1 of Part II of Schedule 3 to the Social Security (Contributions) Regulations 2001] which provided an exclusion for payments in kind.

Reimbursed work-related training costs were excluded from the calculation of earnings forClass 1 NICs purposes by virtue of regulation 19(4)(b) of the Social Security (Contributions) Regulations 1979 [now regulation 25 and paragraph 9 of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001] as expenses incurred in carrying out the employment.  See NIM05020 for general guidance on business expenses.