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HMRC internal manual

National Insurance Manual

NICs avoidance: employment income provided through third parties: conditional exclusions from employment income

Chapter 1 of Part 7A of ITEPA 2003 excludes certain amounts from counting as employment income. For guidance about the exclusions, see EIM45200 onwards.

For the NICs position see NIM52400.

Some of the exclusions in Part 7A of ITEPA 2003 are conditional exclusions. ‘Fall-back charges’ are imposed if the conditions are breached. For an example, see EIM45270.

A fall-back charge deems a relevant step to be taken, giving rise to an amount counting as employment income. This amount of employment income is treated as a payment of earnings for Class 1 NICs purposes in the same way as an actual relevant step.

For guidance about when Class 1 NICs liability may arise on an amount which counts as employment income under Part 7A of ITEPA 2003, see NIM52150.