NIM16278 - Class 1A National Insurance contributions: Special Class 1A NICs cases: Removal benefits and expenses: Removal expenses incurred after end of year of assessment following year employee starts new job

Paragraph 2 of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SSCR 2001) (SI 2001 No 1004)

Section 10(1) of the Social Security Contributions and Benefits Act 1992 (SSCBA 1992)

To qualify for exemption from tax, removal expenses must be included within section 272 ITEPA 2003 and satisfy a number of conditions. One of those conditions is that the expenses must be incurred before the end of the year of assessment following the one in which the employee starts the new job, section 264 of ITEPA 2003, see EIM03104.

NIM06120 explains that to be disregarded from earnings so that Class 1 NICs are not due, the requirement for an eligible expense to be incurred before the end of the year of assessment following the one in which the employee starts the new job, does not apply. This means that even where tax is chargeable on eligible expenses incurred after the time limit has expired, no Class 1 NICs are due.

However, from 6 April 2000, Class 1A NICs are due on all eligible expenses which:

  • are not paid within the prescribed time limit and are therefore taxable but
  • which do not attract a Class 1 NICs liability.

Example

An employee takes up a new employment on 1 March 2017, earning £40,000 a year. The employee’s employer reimburses removal expenses (which fall within those listed in section 272 of ITEPA 2003) after 5 April 2018.

In this example the payments do not qualify for exemption from tax and no Class 1 NICs are due because they are disregarded under paragraph 2 of Part 8 of Schedule 3 to the SSCR 2001.

Class 1A NICs are only due because all the conditions in section 10(1) of the SSCBA 1992 are satisfied. In this example:

  • Section 10(1)(a) is satisfied because there is an amount of general earnings chargeable to income tax under ITEPA 2003, see NIM13070.
  • Section 10(1)(b) is satisfied because the employee earns more than £8,500 a year, see NIM13080.
  • Section 10(1)(c) is satisfied because the expenses are disregarded from earnings for Class 1 NICs purposes, see NIM13090.