NIM02405 - Class 1 NICs : Earnings of employees and office holders : Value Added Tax (VAT)
If there is an element of Value Added Tax (VAT) charged on a payment of earnings, there is no liability for NICs.
A client asks a firm of accountants to provide an expert to join the company on secondment. The employing firm continues to pay the employees salary but invoices the client company. The invoice covers the experts salary and VAT. The VAT is not part of the experts personal earnings and is not liable for Class 1 NICs.
If the VAT element forms part of the employees personal earnings then a liability for NICs will arise on that element.
An employer pays an employees personal telephone bill and the bill includes charges for rental, calls and VAT. If the employer pays the total bill they are discharging the employees personal debt and a liability for NICs will arise on the total value of the bill which is settled by the employer (including the VAT).