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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Liability for Class 1A NICs: Benefits provided to family or household members

A benefit provided for a member of an employee’s or director’s family or household, whether by his employer or someone else, is chargeable to income tax under the benefits code if it is provided by reason of the employee’s or director’s employment, see EIM20504. Before 6 April 2003, benefits provided to members of the family or household of employees or directors in employments covered by Part V Chapter II ICTA 1988 are chargeable to Schedule E income tax on the director or employee, if the benefits are provided by reason of the employment, see SE20504 and SE20505.

Class 1A NICs are payable on these benefits provided they are taxable under ITEPA 2003 as general earnings (before 6 April 2003 – emoluments taxable under Schedule E). The family member does not need to be an employee or receive earnings from the employer for Class 1A NICs liability to arise.

The guidance in the EIM (before 6 April 2003 – the SE Manual) about family and household members applies equally to Class 1A NICs. So, where the benefit is not chargeable to income tax because the employer is an individual (for example the employee’s father) and it can be shown that the benefit was provided in the normal course of his or her domestic family or personal relationships, there will be no Class 1A NIC liability. See EIM20502. Special rules apply to Class 1A NICs on cars provided to members of a director’s or employee’s family or household, see NIM16030.