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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Class 1A National Insurance contributions: Special Class 1A NICs cases: Cars provided for private use: Cash alternatives

Before 6 April 1995, it was sometimes argued, that Class 1A NICs were not payable on cars provided to employees under cash alternative schemes.

To remove any uncertainty, section 157A ICTA 1988 - was introduced from 5 April 1995 (from 6 April 2003 – section 119 of ITEPA 2003). Section 119 of ITEPA 2003 ensures that a section 120 ITEPA 2003 car benefit charge operates, in cases where an employer offers a cash alternative to a company car but the offer is not taken up. The effect of the legislation also served to confirm that where a cash alternative was offered, but not taken, Class 1A NICs were due.

From 6 April 1995, the NICs due on cars provided under a cash alternative scheme depend upon what the employee actually receives.

If the employer provides

  • a car, Class 1A NICs are due
  • cash instead, Class 1 NICs are due.