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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Special Class 1A NICs cases: Third Party benefits: General

Section 10ZA SSCBA 1992Section 10ZA of SSCBA 1992 introduced a change to the normal rules for identifying who is liable to pay Class 1A NICs. The change concerns cases where the provider of general earnings chargeable to income tax under ITEPA 2003 (before 6 April 2003 – emoluments under Schedule E) is someone other than the employee’s employer.

These cases are commonly referred to as ‘third party benefits’ or ‘third party awards’.

To be considered under these special rules, anything provided by a third party must be provided by reason of the employee’s employment, see NIM13060.

The rules covering benefits or awards provided by third parties apply equally to awards made by third parties to members of an employee’s family or household.

Most, but not all, third party awards will involve the employee receiving benefits as part of an incentive or promotional drive, organised by either the employer or a third party. Examples include vouchers or benefits given to employees who achieve sales targets or who sell particular promotional items. It is important to remember, however, that the types of awards that can be made by third parties are not confined to incentive or promotional campaigns. A third party may choose to provide benefits to an employee for a number of different reasons.

The rules for determining whether Class 1A NICs are due on particular benefits provided by third parties are the same as for benefits provided by employers. The only exception to this is the provision by a third party of non-cash vouchers which, if provided by the employee’s employer, would attract a Class 1 NICs liability.

For guidance on the Class 1A NICs position for cars provided by third parties in tax years up to and including the 1999/2000 tax year see NIM17560.

For further guidance on the Class 1A NICs position on third party benefits see NIM16352.