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HMRC internal manual

National Insurance Manual

NICs avoidance: employment income provided through third parties: effect of income tax relief on NICs position - general

Section 554Z14 of ITEPA 2003 permits an application for income tax relief to be made where earmarking is not followed by a further relevant step. Sections 554Z14 and 554Z21 of ITEPA 2003 permit this application to be made where earmarking or provision of security is not followed by payment of a contribution or provision of a benefit. See EIM45875 and EIM45880.

If income tax relief is given under these rules, NICs relief is not given. It is a long-standing principle of the NICs system that Class 1 NICs are not refunded unless they have been paid in error, see NIM37001.

Where an amount of employment income arises under Part 7A of ITEPA 2003, and that amount is treated as earnings for Class 1 NICs purposes, any NICs paid remain properly paid - even if the income tax position is unwound at some later date.

For guidance about the effect of unwinding the income tax position on Class 1 NICs paid, on the amount treated as employment income under section 222 of ITEPA 2003, see NIM52750.

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.