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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 1 NICs: Expenses and allowances: Telephone expenses: Legislation

In accordance with section 6(1) of the same Act, Class 1 NICs are payable when “earnings are paid to or for the benefit of an earner” above a certain level (the earnings threshold). See NIM02015 for further guidance on section 6(1) and NIM01008 regarding the earnings threshold.

Regulation 25 and paragraph 9 of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001 [formerly regulation 19(4)(b) of the Social Security (Contributions) Regulations 1979] exclude from Class 1 NICs

“any specific and distinct payment of, or contribution towards, expenses which an employed earner actually incurs in carrying out his employment.”

This serves to ensure that any actual business expenses will not be liable for Class 1 NICs.

See NIM05020 for general guidance on business expenses.

Most benefits in kind are excluded from liability for Class 1 NICs by virtue of regulation 25 and paragraph 1 of Part II of Schedule 3 to the Social Security (Contributions) Regulations 2001 [formerly regulation 19(1)(d) of the Social Security (Contributions) Regulations 1979]. From 6 April 2000, however, those benefits in kind which are excluded from Class 1 NICs will generally attract a Class 1A liability. See NIM13000 for general guidance on the principles concerning Class 1A liability.