HMRC internal manual

National Insurance Manual

Class 1 NICs: Expenses and allowances: Membership of a club

Where the employer pays the subscription direct he is making a payment of earnings which will be liable for Class 1 NICs. This is because he is making a payment which is clearly remuneration or profit derived from the employment and which is made for the benefit of the employee since the payment meets the employee’s personal debt. In such circumstances he is making a payment of money’s worth (See EIM00530, previously SE00530 for more information of the money’s worth principle).

Where the employer reimburses the cost of subscriptions he is simply making an additional payment of earnings to the employee and this will be liable for Class 1 NICs. As in the alternative circumstance outlined above, the payment is remuneration or profit derived from the employment - the payment is made in consequence of the employment and not for any other reason. It is therefore earnings for NICs purposes. As the payment of earnings is made “to” the employee it will satisfy section 6 of the Social Security Contributions and Benefits Act 1992 and if the total earnings exceed the earnings threshold Class 1 NICs will be payable.

See NIM02010 for information regarding the meaning of earnings, NIM02015 on liability for Class 1 NICs and NIM01008 for information on the earnings threshold.

Where an employer contracts with a club to provide membership for their employees and pays the necessary subscriptions no Class 1 NICs liability will arise, as the payment will be excluded as a payment in kind by virtue of regulation 25 and paragraph 1 of Part 2 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004). A liability for Class 1A NICs will, however, exist. (See NIM13000 for guidance on the general principles relating to Class 1A liability.)