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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
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Class 1 NICs: Expenses and allowances: Medical expenses of employees working outside the UK

Regulation 25 and paragraph 14 of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004)

With effect from 6 April 1998 legislation (then regulation 19(1) (zb) of the Social Security (Contributions) Regulations 1979) was introduced to exclude from Class 1 NICs liability any payment of, or contribution towards, expenses incurred in

  • providing an employee with medical treatment outside the UK where the need for treatment arises while the employee is outside the UK for the purpose of carrying out the duties of his employment; or
  • providing insurance for the employee against the cost of such treatment.

The legislation is now contained in regulation 25 and paragraph 14 of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001.

Payments for medical treatment and insurance in connection with the cost of medical treatment required while an employee is working abroad are not liable for Class 1 NICs regardless of how the treatment or insurance is arranged. The legislation outlined above will exclude from Class 1 NICs any payment an employer makes

  • to a third party (for example a doctor or hospital) for medical treatment
  • to reimburse an employee for the cost of treatment
  • to an insurance provider to cover the cost of premiums for insuring against such treatment costs
  • to reimburse an employee for the cost of premiums for insuring against such treatment.

There was no published guidance on this issue prior to 1998. If, therefore, a case comes to light where a Class 1 NIC liability would have arisen prior to 6 April 1998, payment of any arrears should not be requested unless it is clear that the employer ignored specific advice that a liability existed.

Although Class 1A NICs have been extended to most benefits in kind from 6 April 2000, no Class 1A NICs liability will arise in connection with the provision of medical treatment or insurance for an employee carrying out the duties of an employment outside the UK. This is because these benefits are excluded from charge to tax by virtue of section 325 of the Income Tax (Earnings and Pensions) Act 2003, previously 155(6) of the Income and Corporation Taxes Act 1988 (see EIM21766, previously SE21766). For guidance regarding the general principles concerning Class 1A NICs liability see NIM13000.