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HMRC internal manual

National Insurance Manual

Class 1 NICs: Expenses and allowances: Ministers of religion - reimbursement of household expenses

These payments are therefore excluded from Class 1 NICs as business expenses by virtue of regulation 25 and paragraph 9 of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SI 2001 NO 1004) (previously regulation 19(4)(b) of the Social Security (Contributions) Regulations 1979). See NIM05020 for general guidance about what constitutes a business expense.

We take this more generous stance with regard to the household expenses of ministers of religion because we recognise that their position is unique in so far as they

  • pursue a pastoral vocation which encompasses their whole way of life and of which their families form an integral part, and
  • may be required to live in, and maintain, ecclesiastical property to discharge their vocation.

It would be very difficult, if not impossible, to establish exactly how the reimbursement of expenses is divided between the business and private use of the accommodation. We therefore exclude from Class 1 NICs any reimbursement of expenses in respect of heating, lighting and cleaning.

Although such expenses which are reimbursed to the minister, or which the Church pays in respect of the minister’s bills, can be excluded from Class 1 NICs, you should be aware that a liability for Class 1A NICs may arise.

Class 1A NIC will be appropriate if the Church contracts directly with the service providers for gas, electricity, etc. and pays the bills when received. In such circumstances the provision of heating and lighting, etc. will be a payment in kind which is excluded from Class 1 NICs by virtue of regulation 25 and paragraph 1 of Part 2 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (previously regulation 19(1)(d) of the Social Security (Contributions) Regulations 1979). However, if the payment arises on or after 6 April 2000 - the date Class 1A NICs were extended to most benefits in kind - it will be liable for Class 1A NICs. See NIM13000 for guidance with regard to the general principles concerning liability for Class 1A NICs.

Other expenses

Expenses, other than for heating, lighting and cleaning, which are reimbursed to ministers of religion are treated in exactly the same way as any other payment or reimbursement of expenses to an employee. This will apply to expenses such as telephones or motor mileage allowances/expenses but see NIM05791 in respect of motor mileage allowances paid to Methodist ministers.

See NIM05682 for general guidance regarding the reimbursement of additional household expenses to employees.