Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
, see all updates

Class 1A National Insurance contributions: Special Class 1A NICs cases: Staff suggestion benefits

General The general NICs treatment of payments made in respect of staff suggestion awards is provided at

NIM02350, including the conditions which must be satisfied for an award to be exempt from either Class 1 or Class 1A NICs.

Position before 6 April 2003Before 6 April 2003, section 10(9) SSCBA 1992 and regulation 40(7)(g) of the SS(C)R 2001 excepted emoluments not chargeable to income tax under Schedule E by virtue of ESCA57. ESCA57 excepted from income tax, awards made by an employer to an employee under a Staff Suggestion Scheme provided certain conditions were satisfied. For more information about ESCA57 see SE06600.

If the conditions are not satisfied, the awards will be emoluments chargeable to income under Schedule E. In these circumstances section 10(1)(a) of the SSCBA 1992 will be satisfied. If the other conditions listed in NIM13021 are satisfied, Class 1A NICs liability will arise.

If the conditions of the tax exemption are satisfied but the amounts paid exceed the permitted maximum (SE06600), the amounts above the permitted maximum that can be awarded free of income tax, will be emoluments chargeable to income under Schedule E. In these circumstances section 10(1)(a) of the SSCBA 1992 will be satisfied. If the other conditions listed in NIM13021 are satisfied Class 1A NICs liability will arise.

Position from 6 April 2003From 6 April 2003, ESCA57 became obsolete because it is now covered by the enactment of sections 321 and 322 of ITEPA 2003, see EIM06600. Regulation 40(7)(g) of the SSCR 2001 was repealed. Sections 321 and 322 of ITEPA 2003 exempt from income tax, certain awards or financial benefits made to an employee if the conditions in those sections are satisfied. If the conditions are satisfied and the awards do not exceed the permitted maximum that can be paid or provided free of tax, there can be no general earnings chargeable to income tax so section 10(1)(a) of the SSCBA 1992. Therefore, there will be no Class 1A NICs liability.

If the conditions are not satisfied, the awards will be general earnings chargeable to income under ITEPA 2003. In these circumstances section 10(1)(a) of the SSCBA 1992 will be satisfied. If the other conditions listed in NIM13021 are satisfied Class 1A NICs liability will arise.

If the conditions are satisfied but the amounts paid exceed the permitted maximum (EIM06600) the amounts above the permitted maximum that can be awarded free of income tax, will be general earnings chargeable to income under ITEPA 2003. In these circumstances section 10(1)(a) of the SSCBA 1992 will be satisfied. If the other conditions listed in NIM13021 are satisfied Class 1A NICs liability will arise on the amounts above the permitted maximum.

Staff suggestion award – Mixture of benefits and cash or vouchersWhere a staff suggestion award is provided in more than one form, for example partially in cash and partially by means of benefits, the various elements making up the staff suggestion award must be added together to determine whether the permitted maximum is exceeded. Where the permitted maximum is exceeded, the class of NICs due on that amount which exceeds the prescribed maximum will depend upon how the staff suggestion is made up.

Where an award comprises of different elements

  • Class 1A NICs will be due on any element consisting of a benefit
  • Class 1 NICs will be due on any cash or voucher.

Staff suggestion awards – non-benefitsWhere a staff suggestion award exceeds the permitted maximum that can be paid free of income tax, if what is provided is not disregarded from earnings under paragraph 1 of Part 2 of Schedule 3 to the SSCR 2001 (the payment in kind disregard - see

NIM02020), section 10(1)(c) of the SSCBA 1992 will not be satisfied (see NIM13090). In these circumstances Class 1A NICs are not due, but the amount of the earnings should be added to gross pay when calculating Class 1 NICs liability.