Class 1A National Insurance contributions: Special Class 1A NICs cases: Benefits provided under a cash alternative scheme
Where an employer offers a cash alternative to a benefit, the class of NICs due depends on what the employee actually receives.
If the employee
- is provided with and retains the benefit, Class 1A NICs are due, irrespective of whether the employee can surrender the benefit and receive cash instead
receives cash from his employer instead of the benefit, Class 1 NICs are due.The amount of Class 1A NICs due on a benefit provided under a cash alternative scheme is calculated by reference to the amount on which the employee is chargeable to income tax under ITEPA 2003 (before 6 April 2003 – under Schedule E). For Class 1A NICs purposes it does not matter whether the benefit is chargeable to tax under section 62 of ITEPA 2003 (before 6 April 2003 – section 19(1) of ICTA 1988) and or the benefits code (before 6 April 2003 – section 154 of ICTA 1988). Providing
- the employee enjoys the benefit rather than the cash alternative; and
- what the employee gets is general earnings or treated as such chargeable to income tax under ITEPA 2003 (before 6 April 2003 – is an emolument or treated as such chargeable to income tax under Schedule E), Class 1A NICs liability will arise, providing all the conditions listed in NIM13021 are satisfied.
See NIM16010 for guidance on the NICs treatment of cars provided under cash alternative schemes.