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HMRC internal manual

PAYE Settlement Agreements

HM Revenue & Customs
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National Insurance Contributions and PAYE Settlement Agreements

Items Liable for Class 1A NICs

Class 1B NICs replace any Class 1A NICs liability attached to the expenses and benefitsincluded in a PSA for tax purposes.

From 6 April 2000 most benefits in kind attract Class 1A NICs liability. Employers mustaccount for this liability by 19 July following the end of the tax year in which thebenefit arose.

For a PSA to be valid a signed agreement has to be in place before 6 July so Class 1B NICswill always be substituted for items in a PSA which are otherwise liable for Class 1ANICs.

Items attracting Class 1A NICs include,

  • Christmas parties outside section 264 Income Tax (Earnings and Pensions) Act 2003
  • small non cash gifts

Related Guidance

Further information about which class of NICs applies to an item to be included in a PSAcan be found at Appendix 1 in the guide ‘Class 1A National Insurance contributions onbenefits in kind’ - CWG5.

See PSA3010 for general information about Class 1B NICs and PSA3020 for details of the legislation.

More detailed information about Class 1B NICs can be found in the National InsuranceManual at NIM18000 onwards