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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Liability for Class 1A NICs: Person liable to pay Class 1A NICs: Relevant payment of earnings: No earnings on which Class 1 NICs are due


NIM13101 explains that the person liable to pay Class 1A NICs is the person liable to pay secondary (employer) Class 1 NICs on the last or only ’relevant payment of earnings’ to an earner in the tax year in which the benefit is provided. NIM13111 explains what is meant by a relevant payments of earnings.

Section 10(2)(b) SSCBA 1992 – No earnings on which Class 1 NICs are dueWhere no earnings are paid which would attract Class 1 NICs liability, but a benefit in kind on which Class 1A NICs would be due is provided, the person liable to pay Class 1A NICs is the person who would be liable to pay Class 1 NICs if the benefit was subject to Class 1 NICs. This does not mean that the benefit attracts a Class 1 NICs liability. The benefit is simply treated as a payment of earnings for the purposes of identifying a secondary contributor liable to pay Class 1A NICs.


A director is voted dividends by his company. The company also reimburses the director the cost of business calls made from his home telephone and his qualifying travel expenses. The director receives no other earnings but is provided with a car which is used for both business and private purposes.

While no Class 1 NICs liability arises on either the dividends or the payment of the director’s business expenses, the car is treated as a relevant payment of earnings. The employer is liable to pay Class 1A NICs in respect of the car.Where, unusually, an employee has no earnings, liability for Class 1A NICs arises only where the cash equivalent of any benefits provided to the employee amount to £8,500 or more, or a proportion of £8,500 if the employee was not employed for the whole tax year, see EIM20101 (before 6 April – see SE20101).

The £8,500 earnings threshold does not apply to most directors, see EIM20007 (before 6 April 2003 – see SE20200). So, where there are no earnings apart from the benefits, Class 1A NICs liability can arise if only benefits are provided.