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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Exemptions from Class 1A NICs: Benefits covered by a dispensation

Section 65 of ITEPA (before 6 April 2003 section 166 ICTA 1988)Although benefits included in a dispensation might be general earnings (before 6 April 2003 – emoluments), no income tax is chargeable. Dispensations recognise that some expenses and benefits provided by employers cover business use only and that no tax is payable. The granting of a dispensation removes the burden from an employer of reporting such payments.

No Class 1A NICs liability arises on benefits included in a HMRC agreed dispensation. Section 10(1)(a) of the SSCBA 1992 is not satisfied, see NIM13070. This follows the same Class 1 NICs approach on expenses included in a dispensation.

Most types of benefit provided only for business use can be included in a dispensation. Common examples are

  • business travel, for example, hotel accommodation
  • subscriptions to professional bodies and learned societies approved by HMRC. Dispensations only cover the circumstances for which they were issued and employers must report any change of circumstances affecting a previously agreed dispensation.

Further guidance on dispensations is available at

  • EIM30050 (before 6 April 2003 – SE30050) onwards for tax; and
  • NIM05500 for the general treatment of dispensations for NIC purposes.