Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
, see all updates

Class 1A National Insurance contributions: Calculating Class 1A NICs: Amounts made good by the employee: General

For some benefits in kind the cash equivalent of the benefit, i.e. the amount of general earnings chargeable to income tax under ITEPA 2003 (before 6 April 2003 – emoluments chargeable to income tax under Schedule E), may be reduced by the employee making good an amount to the person at whose cost the benefit was provided. If it is reduced it may affect the amount on which Class 1A NICs are due.

An employee may make good the cost of a benefit by

  • a direct payment
  • by a deduction from salary
  • by a debit to the director’s loan account. Where

  • an employee makes a payment towards the cost of a benefit, and
  • the amount made good reduces the cash equivalent of the benefit, and
  • the employee makes the making good payment before the Class 1A NICs are due to be paid Class 1A NICs are due on the same amount of earnings chargeable to income tax.

Example

Employee is provided with the use of an employer’s asset for several months in the 2007-08 tax year.

The amount of earnings chargeable to income tax under ITEPA 2003 before any making goods payments £2,500.

The employer and employee agreed at the start of the 2007-08 tax year that no later than the end of the tax year, the employee would pay £500 towards the cost of using the employer’s asset.

On 1 April 2008 the employee pays £500 to the employer.

The amount of earnings chargeable to income tax is reduced to £2,000.

The amount of earnings subject to Class 1A NICs is £2,000.

Guidance on making goodSee

NIM15205.

Making good payments made after Class 1A NICs were dueSee

NIM15211 which explains the effect making good payments have on Class 1A NICs if paid after Class 1A NICs were due.