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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 1A National Insurance contributions: Calculating Class 1A NICs: Partial tax deductions: Position from 6 April 2003

The Social Security Contributions and Benefits Act 1992 (Modification of Section 10 (7B)) Regulations 2007 (SI 2007 No. 799)In April 2000 liability to Class 1A NICs, was extended to cover the majority of benefits in kind. Before that date a liability to Class 1A NICs could only arise on company cars and car fuel benefit.

It was agreed with employers and employer representatives that it would cause administrative difficulties for employers to claim deductions in respect of business use where a benefit was available for both business and private use, i.e. a mixed use benefit. So, HMRC’s policy is not to allow business use deductions when calculating Class 1A NICs liability, unless the deductions are fully matching deductions, i.e. the benefits provided were used exclusively for business purposes. Section 10(7) of the Social Security Contributions and Benefits Act 1992 (SSCBA 1992) was drafted accordingly.

The introduction of ITEPA 2003, which replaced part of ICTA 1988, meant that consequential amendments were necessary to section 10 SSCBA 1992. When these amendments were made, reference to some sections of ITEPA 2003 were omitted in paragraph 10(7B) of the SSCBA 1992. Some employers and their agents asserted that the omissions allowed employers to deduct partial deductions from the amount of general earnings before calculating Class 1A NIC liability.

HMRC’s view is that the application of section 10 of the SSCBA, does not allow partial deductions. However, to put the matter beyond doubt, with effect from 6 April 2006, The Social Security Contributions and Benefits Act 1992 (Modification of Section 10(7B)) Regulations 2007 amended section 10(7B) of the SSCBA 1992 to make it clear that the consequential amendments made by ITEPA 2003 replicate the original provisions relating to mixed use benefits.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

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(This content has been withheld because of exemptions in the Freedom of Information Act 2000)