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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: Special Class 1A NICs cases: Fuel for use in a provided car: General

Regulation 25 and paragraph 7D of Part 8 of Schedule 3 SS(C)R 2001

General ruleNIM16173 explains when Class 1 NICs liability arises on the cost of fuel provided to an employee where the fuel is used for

  • private purposes
  • business purposes but the actual cost of the business expense is less than the amount the employee receives.Common methods of meeting fuel costs are shown at

NIM06052.

NIM16173 applies equally to fuel provided for use in

  • a privately owned car, see NIM06050 onwards; and
  • a provided car which attracts a car benefit charge under the special rules in Chapter 6 of Part 3 ITEPA 2003 (before 6 April 2003 – section 157 of ICTA 1988). With effect from 6 April 2002, payments in respect of fuel are disregarded from earnings under paragraph 7D of Part 8 of Schedule 3 to the SS(C)R 2001, so that Class 1 NICs liability does not arise where the fuel provided

  • is for use in a car which attracts a car benefit charge under section 120 ITEPA 2003 (before 6 April 2003 – section 157 ICTA 1988); and
  • attracts a fuel scale charge under section 149 ITEPA 2003 (before 6 April 2003 – section 158 ICTA 1988), see NIM16177 onwards. For the position before 6 April 2002 see NIM16177.

Exceptions to the general ruleIf a charge to income tax does not arise on fuel for a provided car, where

  • the fuel is provided direct from the employer’s own fuel pump; or
  • the employee purchases the fuel on behalf of his employer, see NIM06054. (purchases on behalf of the employer may be made by cash, credit card, garage account, cheque or fuel agency card)what the employee gets is a payment in kind. Payments in kind are disregarded from earnings so that no Class 1 NICs are due. Class 1A NICs liability does not arise on fuel provided in this way because there are no general earnings chargeable to income tax under ITEPA 2003 (before 6 April 2003 – no emoluments chargeable to income tax under Schedule E). That is because sections 239 and 269 ITEPA 2003 (before 6 April 2003 – section 157(3) ICTA 1988) excludes from charge to income tax under ITEPA (before 6 April 2003 – under Schedule E) the discharge of any liability of the employee in connection with the car, see EIM23752 (before 6 April 2003 - SE23005).

NIM16177 explains when Class 1A NICs liability arises on fuel for use in a provided car.