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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Liability for Class 1A NICs before 6 April 2000: Need for a relevant payment of earnings to have been made: Special rules for fuel provided for private use

Section 10(2) SSCBA 1992

NIM17551 explains that for a Class 1A NICs liability to arise in respect of the tax years 1991/1992 to 1997/1998, a relevant payment of earnings had to have been made in the same tax year as the director or employee was provided with a car.

NIM17552 provides guidance on identifying possible sources of earnings where it is alleged that no earnings were received.

One likely source of earnings received by a director, who is provided with a car, is free private fuel. The fuel may have been provided in such a manner that a Class 1 NICs liability rather than a Class 1A NICs liability arose, despite the fuel being used in a provided car. An example is the payment by an employer of the director’s fuel bills, see NIM17520.

Where a director received fuel for private use for a car which attracts a car benefit charge under section 157 ICTA 1988 (see SE23002) but no other earnings, the fuel is not regarded as earnings for the purposes of identifying a relevant payment of earnings.

The only exception to this rule is where a director received a mileage rate or round sum allowance in respect of fuel used in a provided car.

If a mileage rate or round sum allowance was paid to the director, which contained an element of profit, Class 1 NICs are due but no corresponding Class 1A NICs liability arises on either the car or the fuel.