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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 1A National Insurance contributions: Calculating Class 1A NICs: General

Section 10(4) SSCBA 1992Class 1A NICs are calculated as a set percentage of the cash equivalent of a benefit calculated for tax purposes, see

NIM15010.

There are no separate rules for determining the cash equivalent of a benefit for Class 1A NICs purposes. The amount of general earnings on which an employed earner is chargeable to income tax under ITEPA 2003 (before 6 April 2003 – emoluments chargeable to income tax under Schedule E tax) on the benefit, is the amount on which Class 1A NICs are due. This general principle is subject to the exceptions listed at NIM14001 onwards and to any necessary adjustments which need to be made, see NIM15300.

See also NIM13070 about the distinction drawn between the amount on which an earner is chargeable to tax and the amount on which tax is actually paid.

Detailed guidance on the calculation of a cash equivalent is provided in the relevant sections of the EIM (before 6 April 2003 - SE manual). The table at NIM13150 provides a list of the most commonly provided benefits and indicates where the relevant EIM and SE guidance can be found.

To avoid the administrative burdens of calculating Class 1A NICs on the cash equivalent of each benefit separately, the amount of Class 1A NICs due in any one tax year is calculated by using the aggregate total of all cash equivalents arising on benefits provided by an employer which attract a Class 1A NICs liability. Employers can do this calculation by using information recorded by them on forms P11D, see NIM15010.