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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 1A National Insurance contributions: Special Class 1A NICs cases: Beneficial loans: Method of calculating amount of interest: General

Where Class 1A NICs are due on an amount of general earnings chargeable to income tax, under the beneficial loans legislation in Chapter 7 of Part 3 of ITEPA 2003 (before 6 April 2003 – emoluments chargeable to income tax under Schedule E, specifically section 160 of ICTA 1988), the amount of general earnings is calculated in accordance with either section 182 or section 183 of ITEPA 2003 (before 6 April 2003 – paragraphs 4 and 5 of Schedule 7 of ICTA 1988).

For guidance about the two methods of calculating interest, referred to as the averaging and alternative methods, see EIM26200 (before 6 April 2003 – see SE26200).

The normal method of calculating the general earnings chargeable to income tax is the averaging method, see EIM26210 (before 6 April 2003 – see SE26210). EIM26230 explains when the alternative method of calculation is used. Each method can produce different results.

See NIM16682 for guidance about the effect of the averaging method on the Class 1A NICs position.

See NIM16683 for guidance about the effect of the alternative method on the Class 1A NICs position.