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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Identifying whether a benefit has been provided: Establishing the contractual arrangements - Cases of doubt

NIM13180 explains the importance of establishing who it is that makes the contract with a supplier to purchase or supply an item that an employee either has use or takes ownership of. This will help determine whether Class 1 or Class 1A NICs are due.

In cases where doubt exists about whether an employee has received earnings subject to Class 1 NICs or been provided with a benefit subject to Class 1A NICs, it is important to establish all relevant facts. For the meaning of benefit see NIM13171.

The payment by an employer of an employee’s personal bill is not sufficient to render the payment a benefit for NIC purposes. Many directors, particularly of small companies, arrange for their personal bills to be paid by their employers. Often they will arrange for the supplier to send a bill direct to their employer’s address. Although the bill may have the employer’s address on it and the provider may anticipate payment from the employer, this does not necessarily mean that the contract to supply the goods or service is with the employer.

In some cases it is necessary to check who it is that has actually made the contract with the supplier. This is especially important where a dispute arises and it is likely that a decision under section 8 of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 is needed.