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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 1A National Insurance contributions: Liability for Class 1A NICs: Conditions to be satisfied for liability to arise: Earner chargeable to income tax under ITEPA 2003 on amount of general earnings

Section 10(1)(a) SSCBA 1992For Class 1A NICs liability to arise the earner, i.e. the employee or director, must be chargeable to income tax under ITEPA 2003 on an amount of general earnings (before 6 April 2003 – the earner must have been chargeable to income tax under Schedule E on an amount which is or is treated as an emolument).

Most benefits chargeable under ITEPA 2003 are either general earnings or treated as such. Full guidance is contained in the Employment Income Manual. That guidance applies equally for the purposes of Class 1A NICs.

Only where the

  • benefit is general earnings or is treated as such (before 6 April 2003 – emoluments), and
  • earner is chargeable to income tax under ITEPA 2003 on those general earnings (before 6 April 2003 – chargeable to income tax under Schedule E)can Class 1A NICs liability arise.

It is important here to draw a distinction between the words ‘charged’ and ‘chargeable’. In some cases, tax may not actually be charged but the benefit remains chargeable to tax. An example of this occurs where the conditions of a Double Taxation Agreement mean that the UK gives credit for another country’s tax. See NIM16425.

For the purposes of Class 1A NICs it is sufficient for an item to be chargeable to tax in the first instance, tax does not have to be paid.