NIM14200 - Class 1A National Insurance contributions: Exemptions from Class 1A NICs: Benefits covered by a dispensation

Section 10(1)(a) of Social Security Contributions and Benefits Act 1992 (SSCBA 1992)

Section 65 of Income Tax (Earnings and Pensions) Act 2003

Although benefits included in a dispensation might be general earnings, 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.

Where section 10(1)(a) of the SSCBA 1992 is not satisfied, see NIM13070, no Class 1A NICs liability arises on benefits included in a HMRC agreed dispensation. 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 onwards for tax; and
  • NIM05500 for the general treatment of dispensations for NIC purposes.