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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Special Class 1A NICs cases: Child care benefits before 6 April 2005: Exemption from Class 1A NICs liability: General

Section 10(9)(a) SSCBA 1992 and regulation 40(5) and 40(8) SS(C)R 2001

Class 1A NICs liability before 6 April 2005Before 6 April 2005, where an employee was provided with payments or benefits in connection with all or part of the costs and expense of child care, in respect of a child

  • not exceeding the age of 16 years, and
  • for whom the employee had parental responsibilityno Class 1A NICs liability could arise. Such benefits or payments were excepted from Class 1A NICs liability by regulation 40(5) of the SS(C)R 2001. This included benefits, payments and vouchers. See below for the meaning of ‘child care’.

For periods from 6 April 2005 see NIM16110.

Before 6 April 2005, all benefits that consist in the provision of childcare, or are provided in connection with all or part of the costs of child care, were excepted from Class 1A NICs. The exception operated without any qualification about how the child care was provided. An employer may for example

  • provide a nursery on his premises
  • contract with an outside nursery for places
  • contract direct with a nanny to provide childcare for particular employees
  • provide the employee with non-cash vouchers to pay for child care, see NIM02439. This meant that an employer could provide a wide range of child care help to employees without incurring Class 1A NICs liability.

This exception was wider than that provided for tax, see EIM21687 (before 6 April 2003 – SE21687), and means that in some instances a tax liability arises on the employee but no corresponding Class 1A NICs liability arises on the employer.

Class 1 NICs liability before 6 April 2005

NIM02439 explains that paragraph 7 of Part 5 of Schedule 3 to the SS(C)R 2001 disregards certain child care non-cash vouchers from earnings so that no Class 1 NICs are due. Any other type of payment that is not a benefit in kind, should be added to any other earnings paid in the same earnings period when calculating Class 1 NICs. So, any cash payments to employees, pecuniary liability payments, employer credit card and cheque payments are not disregarded from earnings for Class 1 NICs purposes. As they are not disregarded from earnings, Class 1A NICs are not due because section 10(1)(c) of the SSCBA is not satisfied, see NIM13090.

Employee receives child care payments or benefits in more than one employmentSome employees may be in more than one employment and receive child care payments or benefits from each employment. Where these circumstances occur, the exception for Class 1A NICs purposes is applied in each employment.

Meaning of childcareFor the meaning of childcare see


Class 1A NICs liability – Position from 6 April 2005With effect from 6 April 2005 the exception in regulation 40(5) of the SSCR 2001 was revoked by the Social Security (Contributions) (Amendment No 3) Regulations 2005 (SI 2005 No 778). For the NICs position from 6 April 2005 see

NIM16110. EIM22005 explains the income tax position from 6 April 2005.