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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Calculating Class 1A NICs: Establishing whether a fully matching deduction is available: General

As with earnings related Class 1 NICs, the onus to ensure that Class 1A NICs are calculated correctly rests, in the first instance, on the employer. HMRC is entitled to verify that the calculation is correct.

So that HMRC can check calculations, employers must ensure they have sufficient evidence to identify that a reduction was appropriate, where they reduce the amount of Class 1A NICs payable because a fully matching deduction is available. In the context of the deductions listed at NIM15500, the employer must judge whether a fully matching deduction is available. The action taken by employees in relation to their personal tax liabilities does not affect the calculation of Class 1A NICs. Whether or not the employee seeks a deduction, the employer is entitled to reduce his Class 1A NICs if the available deduction fully matches the cash equivalent of the benefit provided.

Where an employer discovers that he has calculated his Class 1A NICs on the basis that a fully matching deduction is available but later discovers this is not the case, he must make good the underpayment of Class 1A NICs.

Where the employer fails to take into account the availability of a fully matching deduction he is entitled to a refund of the overpaid Class 1A NICs, providing the conditions explained at NIM17130 are satisfied.