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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
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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 SSCR 2001; Section 10(1) of the SSCBA 1992To qualify for exemption from tax, removal expenses must be included within section 272 ITEPA 2003 and satisfy a number of conditions. For periods before 6 April 2003, the expenses had to be ‘eligible expenses’ within the meaning of Schedule 11A ICTA 1988 and satisfy the same 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 (before 6 April 2003 – SE03104).

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

Facts

* An employee takes up a new employment on 1 March 2007. 
* The employee earns £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 2008.

Commentary

* The payments do not qualify for exemption from tax.
* 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 due because all the conditions in section 10(1) of the SSCBA 1992 are satisfied.

* Section 10(1)(a) is satisfied because there is an amount of general earnings chargeable to income tax under ITEPA 2003, see [NIM13070](https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim13070). 
* Section 10(1)(b) is satisfied because the employee earns more than £8,500 a year, see [NIM13080](https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim13080).
* Section 10(1)(c) is satisfied because the expenses are disregarded from earnings for Class 1 NICs purposes, see [NIM13090](https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim13090).