Guidance

2024: Class 1A National Insurance contributions on benefits in kind, termination payments and sporting testimonial payments

Updated 10 July 2024

Real Time Information

The following guidance applies to all employers.

Further guidance for reporting Pay As You Earn (PAYE) in real time.

1. Who should read this guide

You should read this guide if:

• you’re an employer who provides benefits and pay expenses to employees
• you provide benefits to the employees of another employer or payroll
• you’re an employer who pays termination payments to employees
• you’re a sporting testimonial committee who is organising a testimonial for a sportsman

If you’re a new employer, or are providing benefits to your employees for the first time, the following HMRC booklets will help you:

• booklet Expenses and benefits for directors and employees — a tax guide: 480
• booklet Tax and National Insurance contributions for employee travel: 490

These booklets are available online from Payroll publications for employers.

We refer to the guidance given in these booklets throughout this guide.

What payrolled benefits are

For the purposes of this guidance, the term ‘payrolled’ means a benefit you’d normally report on form P11D, but you’re taxing through your payroll instead. Provided you’ve registered online before the start of the tax year, any payrolled benefits are not reported on form P11D. You still need to complete form P11D for any employees:

• you chose to exclude from payrolling
• who received any benefits you did not payroll
• you payrolled a benefit for, but had not registered online to tell us you were doing so

Payrolling benefits does not change the National Insurance treatment.

What this guide is about

This guide tells you what you need to know about Class 1A National Insurance contributions. It explains when Class 1A National Insurance contributions are due and how they’re worked out, reported and paid.

Class 1A National Insurance contributions are payable on most benefits provided to employees.

Class 1A National Insurance contributions are also payable on non-contractual termination payments that:

• exceed the £30,000 threshold
• are not already subject to Class 1 National Insurance contributions

Class 1A National Insurance contributions are also payable on non-contractual and non-customary testimonial payments paid to a sportsperson by a sporting testimonial committee which exceeds the £100,000 threshold.

What this guide contains

Paragraphs 4 to 26 explain the general rules about Class 1A National Insurance contributions.

Paragraphs 8 and 26 provide step-by-step guides to working out whether Class 1A National Insurance contributions are due and how they’re worked out, reported and paid.

Paragraphs 27 to 42 explain special Class 1A rules, including what happens when a benefit is provided to an employee by a third party.

Paragraphs 43 to 53 explain some of the main terms used in this guide.

Appendix 1 lists the most common taxable benefits and expenses and tells you which are liable for Class 1A National Insurance contributions.

2. More information about this guide

There are legal requirements that mean employers must comply with their obligations. At the time of writing, this guide sets out HMRC’s view on how these legal requirements can be met.

3. Statutory references

To assist accountants, financial directors and other financial advisers, some sections of this guide include the statutory references on which this guide is based.

The statutory references are taken from the:

• Income Tax (Earnings and Pensions) Act (ITEPA) 2003
• Social Security Contributions and Benefits Act (SSCBA) 1992, as amended
• Social Security (Contributions) Regulations (SS(C)R) 2001, as amended
• National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019

Part 1 — liability for Class 1A National Insurance contributions on benefits in kind

This part explains whether you’ll have to pay Class 1A National Insurance contributions on expenses and benefits in kind.

There’s a quick guide to working out whether you have to pay Class 1A National Insurance contributions at paragraph 8.

4. When Class 1A National Insurance contributions are payable

SSCBA 92, s10(1)

You may have to pay Class 1A National Insurance contributions on a benefit you provide to your employees by reason of their employment.

Where a benefit is provided as part of salary sacrifice or other optional remuneration arrangement (OpRA), special rules apply and the Class 1A National Insurance contributions are calculated as a percentage of the relevant amount. Further guidance is provided in booklet Expenses and benefits for directors and employees — a tax guide: 480.

Certain conditions must apply before Class 1A National Insurance contributions are due.

These conditions are, the:

• benefit must be from, or by reason of, an employee’s employment and must be chargeable to Income Tax under ITEPA 2003 on an amount of general earnings as defined at section 7(3) ITEPA 2003
• employment must be ‘employed earner’s employment’ under social security law and employment as a director or an employee
• benefit must not already attract a Class 1 National Insurance contributions liability

5. When Class 1A National Insurance contributions are due for employees

SSCBA 92, s10(1)(b)

Class 1A National Insurance contributions are due on benefits provided to:

• directors and certain other persons in controlling positions
• employees
• members of the family or households of the above

You can find more information on benefits provided to family members and working out an employee’s earnings in booklet Expenses and benefits for directors and employees — a tax guide: 480.

In the remainder of this guide, where we refer to employees this includes directors, unless we state otherwise.

6. Payment of Class 1A National Insurance contributions

SSCBA 92, s10(2)

Class 1A National Insurance contributions are paid by employers only.

There’s no employee contribution payable.

Legally, the person liable to pay Class 1A National Insurance contributions is the person who:

• is liable to pay employers’ Class 1 National Insurance contributions on the last or only relevant payment of earnings in the tax year
• if there is no employers’ Class 1 liability, would have been liable to pay employers’ Class 1 National Insurance contributions if the benefit itself had been earnings on which Class 1 National Insurance contributions are due

Exception

There’s an exception to this general rule which occurs where a benefit is provided to an employee by someone other than their employer — usually called a third party benefit or award. Read part 6 for information on benefits provided by third parties.

Part 2 — exemptions from Class 1A National Insurance contributions on benefits in kind

In some cases no Class 1A National Insurance contributions are due. You may have to pay Class 1 National Insurance contributions on some benefits and Class 1A National Insurance contributions on others. But Class 1 and Class 1A National Insurance contributions will never be due on the same benefit.

You must find out whether it is Class 1 or Class 1A National Insurance contributions that are due on the benefits you provide.

Read appendix 1 for benefits on which Class 1 National Insurance contributions are due.

7. When Class 1A National Insurance contributions are not due

You do not have to pay Class 1A National Insurance contributions on benefits which are:

• exempt from Income Tax
• exempt from Class 1A National Insurance contributions
• covered by an extra-statutory concession published by HMRC
• included in a PAYE Settlement Agreement
• provided for business use but no significant private use is allowed
• already liable for Class 1 National Insurance contributions
• exempt from Class 1 National Insurance contributions
• making good payments

Exempt from Income Tax

SSCBA 92, s10(1)(a)

Class 1A National Insurance contributions are payable only where the benefit provided is chargeable to Income Tax under ITEPA 2003 on an amount of general earnings as defined at section 7(3) ITEPA 2003. Where no tax is chargeable, no Class 1A National Insurance contributions are due. Full details of those benefits exempt from Income Tax are included in booklet Expenses and benefits for directors and employees — a tax guide: 480.

Exempt from Class 1A National Insurance contributions

Part 3 of the SS(C)R 2001, regulations 38 and 40

Sometimes tax, but not Class 1A National Insurance contributions, may be due on a benefit where the benefit is excluded from Class 1A National Insurance contributions. Details of these special exclusions are given in part 5.

Covered by an extra-statutory concession published by HMRC

SS(C)R 2001, r40(7)

No Class 1A National Insurance contributions are payable where a benefit is not chargeable to tax because of an Extra-Statutory Concession published by HMRC. Read paragraph 51 for more information.

Included in a PAYE Settlement Agreement

SSCBA 92, s10(6)

No Class 1A National Insurance contributions are payable on benefits included in a PAYE Settlement Agreement (PSA). Read paragraph 53 for more information.

Provided for business use but no significant private use is allowed

ITEPA 2003, s316

No Class 1A National Insurance contributions are payable where you provide, on your premises, benefits to your employees to allow them to carry out their duties but there’s also some private use by the employee, but that private use is not significant. Also, no Class 1A National Insurance contributions are payable when you provide benefits off your premises, as long as your sole purpose in providing the benefit is so the employee can carry out their duties.

Examples where this exemption will apply include a:

• fax machine provided for use by an employee working from home, which is occasionally used for private purposes
• phone provided to allow an employee to receive or make business calls, on which occasional private calls are permitted

This exemption does not apply where the benefit provided:

• is a motor vehicle, boat or aircraft
• involves an improvement or extension to living accommodation

If this exemption does not apply (for instance if the private use is not insignificant, or the benefit is a motor vehicle, boat, aircraft or an improvement to living accommodation) Class 1A National Insurance contributions will be due. The benefit must continue to be reported on form P11D or, if you payrolled the benefit, on the Full Payment Submission whatever the amount of business use.

Already liable for Class 1 National Insurance contributions

SSCBA 92, s10(1)(c)

No Class 1A National Insurance contributions are payable on benefits which are liable for Class 1 National Insurance contributions. Read appendix 1 for those benefits on which Class 1 National Insurance contributions are due.

Exempt from Class 1 National Insurance contributions

SS(C)R 2001, r40

No Class 1A National Insurance contributions are payable on certain payments which are also exempt from Class 1 National Insurance contributions.

Examples include:

• certain payments out of retirement benefits schemes
• redundancy payments
• payments of, or contributions towards, specific and distinct expenses actually incurred by an employee in carrying out the employment — for example, if you reimburse an employee for the cost of washing a uniform worn at work

If you’re not sure whether Class 1 or Class 1A National Insurance contributions are due on a particular benefit, read appendix 1 and help and guidance for contact details.

ITEPA 2003, s323A

No Class 1A National Insurance contributions are payable on a benefit for your employee if all the following apply:

• it cost you £50 or less to provide
• it is not cash or a cash voucher
• it is not a reward for their work or performance
• it is not in the terms of their contract or provided under salary sacrifice

This is known as a ‘trivial benefit’. You do not need to pay tax or National Insurance, or let HMRC know.

Making good payments

When a taxable benefit in kind is made good in full by the legislated date — the rules for making good taxable benefits in kind changed from 6 April 2017. Employment Income Manual EIM21119 has details of these changes for tax purposes.

For National Insurance contributions purposes, regulations 71 and 80 of the Social Security (Contributions) Regulations 2001 set the dates by when payments of National Insurance contributions must be made.

A making good payment by 6 July (following the tax year in which the benefit was provided (for tax purposes)) will also automatically remove or reduce the Class 1A National Insurance contributions liability, as the payment will be made prior to the due date for paying Class 1A (19 or 22 July).

No changes have been made to the existing National Insurance contributions legislation and any making good payments after 6 July will not reduce the Class 1A National Insurance contributions due.

8. Quick guide to working out whether Class 1A National Insurance contributions are due

Class 1A National insurance contributions will not be due if any of the following apply:

• your employee receives a benefit from or because of their employment with you that’s not chargeable to Income Tax
• your employee’s employment is not in ‘employed earner’s employment’ (an ‘employed earner’ means a person who is gainfully employed in either Great Britain or Northern Ireland either under a contract of service, or in an office (including elective office) with general earnings)
• Class 1 National Insurance contributions are due on the benefit
• the benefit is included in a PAYE Settlement Agreement
• the benefit is for business use only, or available primarily for business use and there is no significant private use
• the benefit is excluded from Class 1A National Insurance contributions

Find out more about third party benefits in part 6, and when Class 1A National Insurance contributions are:

• payable
• due for employees
• not due

Part 3 — working out Class 1A National Insurance contributions on benefits in kind

This part explains how to work out Class 1A National Insurance contributions. The rules described in this section should be used for all benefits.

The rules for making good taxable benefits in kind changed from 6 April 2017. The Employment Income Manual EIM21119 has details of these changes for tax purposes.

If you provide company cars to your employees, you’ll need to read booklet Expenses and benefits for directors and employees — a tax guide: 480.

It also gives details of how Class 1A National Insurance contributions are calculated in special or unusual cases, including shared cars and cars provided by more than one employer.

9. How to calculate Class 1A National Insurance contributions

Class 1A National Insurance contributions are calculated as a percentage of the cash equivalent of a benefit. The cash equivalent figure used to work out Class 1A National Insurance contributions is the same figure which you report for tax purposes on form P11D expenses and benefits (or substitute) or as a taxable amount for payrolling through RTI.

Where a benefit is provided as part of salary sacrifice or other OpRA, special rules apply and the Class 1A National Insurance contributions are calculated as a percentage of the relevant amount. Further guidance is provided in Part 5 booklet Expenses and benefits for directors and employees — a tax guide: 480.

The rules for working out the cash equivalent of a benefit are given in booklet Expenses and benefits for directors and employees — a tax guide: 480, and in various optional working sheets provided with form P11D.

So that you do not have to work out Class 1A National Insurance contributions on each cash equivalent, the total amount of Class 1A National Insurance contributions payable is calculated by:

• adding together each cash equivalent figure for each benefit, for each employee
• multiplying the total figure by the Class 1A percentage rate

The percentage rate of Class 1A National Insurance contributions is the employers’ Class 1 National Insurance contributions rate for the tax year in which the benefit is made available.

This applies even if the employee is a director.

Example

During the tax year 2023 to 2024, you provide health care and company cars to 25 of your employees. The Class 1A National Insurance contributions percentage rate for the 2023 to 2024 tax year is 13.8%.

The cash equivalent figures reported on each employee’s P11D are £150 health care and £3,000 car benefit.

To calculate the Class 1A National Insurance contributions due:

1. Add the total cash equivalent figures together.
   
   £150 x 25 = £3,750
   £3,000 x 25 = £75,000
   Total = £78,750
   

2. Multiply the figure from step 1 by the Class 1A percentage rate.
   
   £78,750 x 13.8% = £10,867.50
   
   Class 1A National Insurance contributions due = £10,867.50

Once you’ve worked out the amount of Class 1A National Insurance contributions due you may need to adjust the figure.

Read paragraph 18 for instances where this may be necessary.

10. Record keeping for Class 1A National Insurance contributions purposes

If you’ve used the figures from your P11Ds or Full Payment Submissions to calculate the Class 1A National Insurance contributions due, you do not need to keep further records.

If you’ve used substitute forms, or you used the adjustment boxes on form P11D(b), you may be asked to provide evidence about how you arrived at the figures you used. It’s important you keep supporting records, on paper or electronically, to show how you made your calculations. You must provide them on request. If you provide company cars or vans and fuel it may be to your advantage to keep detailed records of those particular benefits to calculate the amount of Class 1A National Insurance contributions due.

Read booklet Expenses and benefits for directors and employees — a tax guide: 480.

11. How benefits provided can affect their National Insurance contributions treatment

Sometimes, the way in which you provide benefits to your employees can decide whether Class 1 or Class 1A National Insurance contributions are due on them. It’s important you look carefully at how you provide benefits to your employees, as this will affect what class of National Insurance contributions you’re liable to pay.

Example

If you meet your employee’s personal liability (such as paying for or reimbursing private health insurance that your employee has taken out) that amount should be treated as gross pay on which Class 1 National Insurance contributions will be due.

If you take out a contract with a provider to provide an employee with private health insurance, then that will normally be a benefit recorded on the employee’s P11D or taxed through payrolling and Class 1A National Insurance contributions will be due.

12. Benefits provided only for business use

No Class 1A National Insurance contributions will be due where a benefit is provided:

• necessarily for use by employees wholly and exclusively in the performance of their duties
• in the course of qualifying business travel

Read booklet Tax and National Insurance contributions for employee travel: 490.

13. Benefits provided where there’s a mixed business and private use by the employee

In most cases, Class 1A National Insurance contributions will be due on the full amount of a benefit that’s made available to an employee for both private and business purposes.

This means you can use the figures you record on your employees’ P11Ds or payroll to work out the amount of Class 1A National Insurance contributions due, without having to find out whether your employees are entitled to claim a tax deduction after the end of the tax year.

Where an employee reimburses the full cost of any private use before the due date for payment of Class 1A National Insurance contributions (read paragraph 15), no Class 1A National Insurance contributions are due.

Where certain benefits are provided for business use but the employee uses the benefit for private purposes, but that private use is not significant, you will not need to report this on form P11D or payroll the benefits, and no Class 1A National Insurance contributions are due.

Read paragraph 7 for more information.

How to calculate Class 1A National Insurance contributions where there’s mixed use

Example 1

It’s an integral part of an employee’s duties of employment to be able to make and receive business calls at home. The employer agrees to provide and pay for a phone which is available for business and private use.

To determine the Class 1A liability you must first determine the amount of the benefit chargeable to tax. The phone is available for business and private use for 365 days a year and the total cost of line rental and all calls is £1,000. Business calls amount to £550, the line rental is £150 and private calls amount to £300. Unless the employee makes good the cost of all private calls and the full cost of the line rental by the due date for payment, Class 1A National Insurance contributions are due on the full cost to the employer for the whole year. The amount of the benefit as determined for tax purposes, in this example, is £1,000.

For tax purposes, the employee can claim a deduction of £550 for the business use, which reduces the taxable benefit to £450. The deduction of £550 is not taken into account for Class 1A National Insurance contributions purposes.

However, there are also situations where an asset or service is used primarily by the business itself for business purposes and not by the employee.

The contractual responsibility for paying for the asset or service lies with the employer but the employee may derive a benefit from using part of that asset or service. In those circumstances, the full amount of the benefit provided to the employee, on which Class 1A National Insurance contributions will be due, is calculated on the part of the assets or services that have been used by the employee for business and private purposes. Read example 2.

Example 2

The owner of a golf club provides living accommodation for the club steward above the clubhouse.

Mains gas and electricity are supplied to the business premises which includes:

• a block of showers and changing facilities for golf club members
• the clubhouse
• the pro shop
• a driving range
• the accommodation provided for the club steward

One meter monitors the gas and electricity used for all buildings.

While the club steward does have the use of gas and electricity all year round in the accommodation provided for him, he clearly derives no personal benefit from the electricity and gas supplied to any of the other buildings.

To determine the Class 1A liability you must first determine the amount chargeable to tax. The amount chargeable to tax is based on the cost to the employer of providing gas and electricity to the employee for both business and private use. Where it excludes the proportion of the services provided solely for the purpose of running the business, liability for Class 1A will follow. In this example, 75% of the electricity and gas used relates solely to the running of the business so the amount chargeable to tax and on which Class 1A National Insurance contributions is due is the remaining 25%. The club steward may claim that a proportion of that 25% was also related to his business use of the provided accommodation.

For tax purposes, a deduction may be due. Class 1A National Insurance contributions are due on the full 25%, irrespective of any deductions allowed for tax purposes.

This is illustrated by the following:

Total electricity and gas charges — £5,000
Proportion relating solely to the business (75%) — £3,750
Proportion relating to availability for business and private use by the employee (25%) — £1,250
Full amount chargeable to tax before deductions and on which Class 1A National Insurance contributions are payable — £1,250

If the club steward claims there was mixed business and private use of the gas and electricity used in the provided accommodation and claims a 15% deduction for business use, this is allowed for tax purposes. This is not taken into account for Class 1A National Insurance contributions purposes.

So, where there’s mixed business and private use by the employee of a benefit, Class 1A National Insurance contributions are due on the full amount chargeable to tax ignoring any deductions the employee may be able to claim for tax purposes.

You can read paragraph 12 where a fully matching deduction is available.

Any part of an asset or services used exclusively to facilitate the employer’s business and from which the employee derives no benefit, should not be taken into account when calculating the amount of the benefit chargeable to tax. The rules for determining the amount of a benefit are explained in the Employment Income Manual (EIM21102).

Calculating Class 1A National Insurance contributions — an example where there is no mixed use

There are situations where an asset or service is bought and used primarily for business purposes but where there’s occasional private use by an employee. For example, a business buys a limousine for the purpose of chauffeuring overseas visitors to and from airports and business meetings. When the limousine is used for this purpose it is not available for any of the employees’ or directors’ use, either business or private.

But for 2 weeks a year the car is not needed for this purpose and is placed at the disposal of the managing director for private use. In these circumstances there is no mixed business and private use by the director, because the car is exclusively available for private use but only for the 2 weeks. The amount of benefit chargeable to tax, and on which Class 1A National Insurance contributions is due, will be calculated based on the 2 weeks the car was available for private use only.

14. Use form P11D to help work out Class 1A National Insurance contributions

Form P11D will help you to identify which benefits are liable for Class 1A National Insurance contributions. These are shown in brown boxes and have a ‘1A’ indicator. Only those benefits that have this indicator box should be included in your Class 1A National Insurance contributions calculation.

Those benefits which attract a Class 1 National Insurance contributions liability but are recorded on form P11D for tax purposes will have no Class 1A indicator box. You should not include those benefits in your Class 1A National Insurance contributions calculation.

As Class 1A National Insurance contributions are worked out using information recorded on form P11D, it’s important these forms are completed correctly. This will make sure you pay the correct amount of Class 1A National Insurance contributions. If you registered online before the start of the year to payroll benefits and you’ve done so, you do not report these benefits on form P11D, but you may use the form to help you work out the correct amount of Class 1A National Insurance contributions.

Example 1

In example 1 in paragraph 13, the cost of the business calls must not be deducted from the cash equivalent figure. So the correct entries on P11D would look like the following.

Section K Services supplied
Cost to the employer £1,000
Amount made good or from which tax deducted £0
Cash equivalent (Class 1A indicator box) £1,000

Example 2

In example 2 in paragraph 13, the cost to the employer is the cost of the services made available to the employee for private and business use. If the club steward claims there was mixed business and private use of the services in the provided accommodation, this must not be deducted from the cash equivalent figure. So the correct entries on P11D would like the following.

Section K Services supplied
Cost to the employer £1,250
Amount made good or from which tax deducted £0
Cash equivalent (Class 1A indicator box) £1,250

Part 4 — reporting and paying Class 1A National Insurance contributions on benefits in kind

This part gives guidance on reporting and paying Class 1A National Insurance contributions. It explains how you should report information about Class 1A National Insurance contributions to us and how you should make payment.

There’s a quick guide to working out and paying Class 1A National Insurance contributions at paragraph 26.

When you use payrolling to report your benefits, this is for tax purposes only not National Insurance contributions. You need to report and pay Class 1A National Insurance contributions separately. See paragraph 15 for details of the payment dates.

15. Key dates for reporting and paying Class 1A National Insurance contributions

The 3 key dates for Class 1A National Insurance contributions due are:

• 6 July — for forms P11D and P11D(b), ‘Return of Class 1A National Insurance contributions due’
• 19 July — for receipt of a cheque payment of Class 1A National Insurance contributions through the post
• 22 July — if paying electronically, your payment of Class 1A National Insurance contributions must clear into HMRC’s bank account by 22 July

A making good payment by 6 July (for tax purposes) will also automatically remove or reduce the Class 1A National Insurance contributions liability, as the payment will be made prior to the due date for paying Class 1A. Any making good of benefits in kind after 6 July will not take away the National Insurance contribution liability.

When paying electronically you need to allow enough time for us to have cleared funds by 22 July following the end of the tax year. You can pay HMRC using a number of different payment methods. HMRC accepts payments made using the Faster Payments Service which clear on the same or next day. However, some electronic payment methods can take 3 bank working days or more to reach our account.

Bank working days are Monday to Friday excluding bank holidays.

If paying by post, your cheque payment must be posted early enough to reach us no later than 19 July. As postal delays are out of your and HMRC’s hands we recommend the security and certainty of electronic payments.

Paragraph 21 has more detail about how to pay.

Late payment penalties — if your Class 1A National Insurance contributions payment is not made on time, we may charge you the following penalties:

• 5% penalty of any amount unpaid 30 days after the due date
• an additional 5% penalty on any amount still unpaid 6 months after the due date
• a further 5% penalty on any amount still unpaid 12 months after the due date

More information about late payment penalties.

16. How to report Class 1A National Insurance contributions through the P11D(b) process

Once you’ve worked out the amount of Class 1A National Insurance contributions due you’ll need to complete and send us form P11D(b), ‘Return of Class 1A National Insurance contributions due’, showing the total amount of Class 1A National Insurance contributions due.

You must send us both form P11D and P11D(b) declaration by 6 July following the tax year in which the benefit is provided. If you registered online to payroll all your benefits prior to the start of the tax year and have done so, you just need to send form P11D(b). If you payrolled any benefits without registering online to do so, you need to send P11Ds as well. You will need to make a note on form P11D to show which benefits have been taxed through the payroll.

17. Using substitute forms

From 6 April 2023, all employers were mandated to file their P11D and P11D(b) forms online unless they were digitally exempt.

Mileage Allowance Relief Optional Reporting Scheme (MARORS) claims cannot be filed online so you can submit these claims as a list to us.

Your list for MARORS claims must be:

• easy to read
• in Arial font size 11 as a minimum
• in alphabetical order by employee’s surname
• include each employee’s:
  • name
  • gender
  • National Insurance number
  • date of birth

18. Using the P11D(b) adjustment facility

You can use section 4 of form P11D(b) to make adjustments to the total benefits liable to Class 1A National Insurance contributions.

You may need to make an adjustment if you’ve:

• used substitute forms or lists which do not identify the items subject to Class 1A National Insurance contributions
• reported a cash equivalent figure on form P11D for tax purposes which incorrectly included tax already deducted
• reported a benefit on form P11D for which a fully matching tax deduction is available (read paragraph 12 and paragraph 13)
• included a benefit figure on form P11D for employees who have no National Insurance contributions liabilities (read paragraph 27)

19. Correcting paper forms P11D or P11D(b)

Use the online P11D (b) and P11d amendment forms to correct any errors after you have submitted your P11D (b) and P11D.

Read the expenses and benefits for employers guide for more information.

20. Reports of amended Class 1A National Insurance contributions liability arising on benefits in kind

Sometimes, more information may be made available to you after you’ve calculated and paid your Class 1A National Insurance contributions in July.

Where this happens you might have to recalculate the amount of Class 1A National Insurance contributions due. The late information may relate to periods when a benefit was unavailable to an employee.

If you need to recalculate the Class 1A National Insurance contributions due after making your original payment you must send in a revised form P11D(b) and, where appropriate, revised form P11D.

More information on online end of year corrections to expenses and benefits reported.

21. How and when to pay Class 1A National Insurance contributions arising on benefits in kind

We must receive payment of Class 1A National Insurance contributions by 19 July following the end of the tax year, or 22 July if payment is made electronically.

When paying electronically you must use your Accounts Office reference number as the payment reference. You must also show the correct tax year and month the payment relates to as the payment you make in July will always be for the previous tax year.

To make a payment in July 2020, for your 2019 to 2020 Class 1A National Insurance contributions you’ll need to add 2013 to the end of your Accounts Office reference. By using 13 as the final 2 digits you’re letting us know this payment is intended as Class 1A National Insurance contributions. For example, 123PA000123452013 with no gaps (this reference is only an example and should not be used to make a payment). Your reference will be shown on the Class 1A National Insurance contributions payslip which we’ll send you in April.

The last 4 digits are essential to make sure we allocate your payment to the correct year. If you do not provide them we’ll automatically allocate your payment to the current deduction year instead. And, we’ll send you a demand for your Class 1A National Insurance contributions payment.

Pay in full and on time

You can pay HMRC using a number of different payment methods, but we recommend you pay electronically as it is safe and secure and avoids postal costs and delays. HMRC accepts payments made using the Faster Payments Service which clear on the same or next day. However, some electronic payment methods can take 3 bank working days or more to reach our account. Bank working days are Monday to Friday excluding bank holidays.

To make sure you pay on time you should check with your bank or building society well in advance of making a payment to find out about the payment method you intend to use. Check the services available to you, such as any single transaction, daily value limits and cut-off times for processing payments, to avoid your payment to HMRC being delayed.

It’s your responsibility to make sure payments are made on time, whichever payment method you use. If your Class 1A National Insurance contributions payment is not received on time, you’ll be noted as paying late which may mean you’re charged interest and a late payment penalty.

You should use your Class 1A National Insurance contributions payslip if you pay at a bank or by cheque through the post. If paying by post, post your cheque payment with the completed payslip in good time, allowing at least 3 working days for your payment to reach the Accounts Office.

Read more information about:

• paying Class 1A National Insurance contributions arising on benefits in kind
• payment deadlines

22. If your business ends

Tell us when:

• your business ends
• you do not expect to employ anyone for a complete tax year, or longer

We’ll send you form P11D(b) to complete.

23. When a transfer or succession of business occurs

The old employer must complete form P11D(b) for the Class 1A National Insurance contributions payable in respect of the period up until the date of transfer or succession. The new employer will be responsible for reporting and paying Class 1A National Insurance contributions from the date of transfer.

24. Interest charges for late payment of Class 1A National Insurance contributions arising on benefits in kind

If you pay late, or if an underpayment of Class 1A National Insurance contributions is discovered either by you or by us, you may have to pay interest on the amount outstanding.

Statutory interest for late payment is charged immediately from 19 July, or 22 July if payment is made by an approved electronic method.

25. Late return penalties

You may be charged penalties for failing to make a return of Class 1A National Insurance contributions and for fraudulently or negligently making an incorrect return.

The filing date for the return is 6 July. If we do not receive the return by 19 July it may attract a penalty of £100 per month or part month of lateness, for every 50 or part-batch of 50 employees provided with benefits.

If the failure continues beyond 12 months there’s an additional penalty not exceeding the amount of the Class 1A National Insurance contributions paid late.

An incorrect return made carelessly or deliberately attracts a penalty not exceeding the difference between the amount of Class 1A National Insurance contributions shown on that return and the amount that should have been shown.

26. Quick guide to working out, reporting and paying Class 1A National Insurance contributions liabilities arising on benefits in kind

There’s more information in paragraphs 9 to 25.

1. Establish whether Class 1A National Insurance contributions are due.
   
   Read paragraphs 4 to 8.
   
   

2. Calculate the amount of Class 1A National Insurance contributions due.
   
   Add together the cash equivalent of each benefit liable to Class 1A National Insurance contributions.
   
   Multiply the total by 13.8%.
   
   Read paragraph 9.
   
   You now have the amount of Class 1A National Insurance contributions due.
   
   

3. Report the Class 1A National Insurance contributions due.
   
   Complete the Class 1A National Insurance contributions declaration on form P11D(b), using the amount from step 2.
   
   Return the P11D(b) together with completed P11Ds by 6 July.
   
   Read paragraph 16.
   
   

4. Pay the Class 1A National Insurance contributions due.
   
   Make an electronic payment in good time to clear by 22 July.
   
   If paying by post, post your cheque and completed Class 1A National Insurance contributions payslip to the Accounts Office to arrive on or before 19 July.
   
   Read paragraph 21.
   

Part 5 — special cases

This part deals with uncommon situations and benefits where special rules apply.

27. Employees going or coming from abroad

Benefits may be:

• provided to employees whilst they’re abroad
• left behind for their use once they return
• available to family members whilst they’re abroad

If an employee is working wholly overseas and is not resident in the UK they’ll not have a taxable employment. Form P11D will not be required.

Where an employee works wholly overseas during the overseas part of a split year, they will not have a taxable employment for the overseas part of the year. The benefits in kind for that period will not be taxable and will not be reportable, but they may be if the employee is taxable in the UK for any part of the year.

For employees going or coming from abroad, who are provided with benefits, 2 factors decide if Class 1A National Insurance contributions are due.

For Class 1A National Insurance contributions to be due:

• the benefit must be chargeable to Income Tax under ITEPA 2003 on an amount of general earnings as defined at section 7(3) ITEPA 2003 (even though tax may not actually be paid)
• there must be liability for employers’ Class 1 National Insurance contributions for any part of the tax year in which the benefit was provided

In some cases a person’s liability for Class 1 National Insurance contributions, when they are abroad, may end part way through the year.

This can happen where:

• another country’s social security legislation applies so no UK National Insurance contributions are payable under the terms of a social security agreement that the UK has with one or more countries (sometimes known as reciprocal agreements, bilateral agreements or social security coordination agreements)
• the person is working abroad in a country where the UK has no social security agreement and they’ve been employed there for more than 52 weeks

When a person is covered under a social security agreement and only liable to pay social security contributions into another country’s social security scheme, they are not liable to pay UK National Insurance contributions. Liability for Class 1A National Insurance contributions also stops. If liability ends part way through the tax year, you have to pay Class 1A National Insurance contributions on the taxable benefits but adjust the calculation to take account of Class 1A National Insurance contributions liability ending part way through that tax year.

To adjust the Class 1A National Insurance contributions calculation for the part year, you should:

• calculate the Class 1A National Insurance contributions using the rules described in parts 1 to 3 of this guide
• treat the benefit as being unavailable in the days from the date when the UK National Insurance contributions liability ends

Class 1A National Insurance contributions are calculated on a pro rata basis. You should use the adjustment facility provided on form P11D(b) if you need to adjust the amount of Class 1A National Insurance contributions due.

For guidance about the National Insurance contributions rules when people go to work abroad or come to the UK from abroad read:

• National Insurance if you work abroad
• employees working abroad
• paying National Insurance if you’re going to work in the EU, Gibraltar, Iceland, Liechtenstein, Norway, or Switzerland
• new employee coming to work from abroad
• paying social security contributions if you’re coming to work in the UK from the EU, Gibraltar, Iceland, Liechtenstein, Norway, or Switzerland

28. Company cars or vans and fuel benefit

Company cars or vans and fuel benefits are taxed under special rules contained in part 3 chapter 6 of ITEPA 2003. Class 1A National Insurance contributions on these benefits follow the normal Class 1A National Insurance contributions rules, but there are special Class 1A National Insurance contributions rules for cars or vans provided in unusual circumstances.

Examples include:

• a car or van shared by 2 or more employees
• sharing the cost of providing a car or van between 2 employers

If you provide cars or vans in special or unusual cases, read Expenses and benefits for directors and employees — a tax guide: 480.

29. Childcare

SSCBA 1992, s10

Employer provided childcare

Liability for Class 1A National Insurance contributions on the provision of childcare benefits has been aligned with the tax position since 6 April 2005. For information on the tax position, read booklet Expenses and benefits for directors and employees — a tax guide: 480.

Broadly, employer supported childcare is exempt from National Insurance contributions in line with the tax treatment under s318 and s318A— D ITEPA 2003. So long as the qualifying conditions are satisfied, National Insurance contributions are only payable on the cost of the childcare which exceeds the amount that is exempt from tax.

Workplace nurseries where you provide childcare in a nursery or play-scheme on your premises (or on premises you provide jointly with others that you’re wholly or partly responsible for financing and managing), will not be liable for Class 1A National Insurance contributions where that’s in line with the tax treatment.

These exemptions do not extend to:

• school fees
• cash that you give to employees to help them meet the cost of their own childcare arrangements
• paying an employee’s childcare bills on their behalf

In these cases Class 1 National Insurance contributions are due.

Childcare Voucher schemes

From 6 April 2011 changes were made to the rules about providing vouchers to employees for childcare. For those in a childcare voucher scheme from that date the amount that could be disregarded depended on the tax position of the employee. Currently the amounts that can be disregarded for National Insurance contributions purposes are:

• £55 a week for basic rate taxpayers
• £28 for higher rate taxpayers
• £25 for additional rate taxpayers

It’s the responsibility of the employer to determine the tax liability of the employee before awarding vouchers so they know how much can be correctly disregarded.

Any excess of vouchers given above those values are earnings liable for Class 1 National Insurance contributions.

30. Fees and professional subscriptions

SSCBA 92, S10SS(C)R 2001, regulation 40 and paragraph 11 of part 10 of schedule 3

Some subscriptions and fees paid to certain approved professional bodies and societies are exempt from National Insurance contributions in line with the Income Tax treatment under s343 and s344 ITEPA 2003.

Subscriptions and fees not exempt from tax under s343 and s344 ITEPA 2003

National Insurance contributions are due where employers meet the costs of subscriptions and fees paid to a body or society.

Class 1A National Insurance contributions are payable if you contract with the body concerned to provide membership for your employees.

Class 1 National Insurance contributions are payable if you reimburse the cost of membership arranged by the employees themselves.

31. Incidental overnight expenses

SSCBA 92, S10SS(C)R 2001, paragraph 4 of part 10 of schedule 3

Employees who have to stay away from home overnight on business may incur additional expenses of a personal nature. Examples include newspapers, laundry and phone calls home.

There’s an exemption which allows employers to pay these incidental expenses free of tax and National Insurance contributions as long as they are within prescribed limits and certain conditions are met. Full details of the qualifying conditions are set out in booklet Expenses and benefits for directors and employees — a tax guide: 480.

The exemption covers all possible ways in which an employer can meet these expenses, including:

• payment by non-cash voucher
• credit card
• cash payments
• by way of a benefit

Where you pay or provide an incidental expense that exceeds the prescribed limit or fails the qualifying conditions, the whole amount (not just the excess) is liable to tax and National Insurance contributions under the normal rules. For the purposes of determining whether the prescribed limit is exceeded, the various elements of the incidental expense must be added together.

The National Insurance contributions liability will depend upon how the incidental overnight expense is paid. Where it consists:

• wholly of cash, non-cash vouchers or credit card payment, Class 1 National Insurance contributions are payable
• wholly of a benefit, Class 1A National Insurance contributions are payable
• of a combination of various elements:
  • Class 1 National Insurance contributions are payable on the cash payments, non-cash vouchers and credit card payments
  • Class 1A National Insurance contributions are payable on any benefit

Example 1

An employee spends 4 nights away from home in the UK and receives incidental expenses totalling £32. The expenses are made up of £12 cash, an £8 non-cash voucher, and the inclusion of a laundry charge in the overall hotel bill arranged and met by the employer amounting to £12.

As the incidental overnight expenses exceed the prescribed maximum of £20 (4 nights at £5), the National Insurance contributions liability is calculated as follows:

• Class 1 National Insurance contributions on £20 — the total of cash and non-cash voucher elements
• Class 1A National Insurance contributions on £12 — the benefit of the laundry charge

Example 2

An employee spends 3 nights away from home in the UK and receives incidental expenses that total £12. The expenses are made up of £9 cash, and a £3 newspaper charge included in the hotel bill met by the employer.

As the incidental overnight expenses do not exceed the prescribed maximum of £15 (3 nights at £5), there’s no tax or National Insurance contributions liability.

32. Relocation expenses and benefits

SSCBA 92, S10SS(C)R 2001, r40

Details of when Class 1 National Insurance contributions are due on relocation expenses are in booklet CWG2: Further guide to PAYE and National Insurance contributions.

As well as any Class 1 National Insurance contributions that may be due in connection with relocation expenses you pay, Class 1A National Insurance contributions may be due if you:

• provide any type of relocation benefit which is not exempt from Income Tax
• pay any exempt expense after the relevant day
• provide a relocation package which exceeds the prescribed maximum of £8,000, whether the excess comprises benefits and or expenses

Class 1A National Insurance contributions are not due on any exempt relocation benefit or expense which counts towards the £8,000 tax exemption limit.

Exempt benefits and expenses are listed in booklet Expenses and benefits for directors and employees — a tax guide: 480.

Example

An employee is relocated to a new job in May. The employer pays the following relocation expenses and benefits which are all paid before the relevant day:

1. legal and estate agent’s fees — £2,500

2. removal costs — £1,000

3. travel costs for visiting the new location — £500

4. temporary living accommodation — £3,000

5. school fees for the children of the employee — £3,000

6. domestic goods purchased by employer to replace items unsuitable for use in the new home — £2,500

7. landscape gardening provided by employer — £1,500

Total — £14,000

National Insurance contributions liability

Class 1 National Insurance contributions are due on school fees of £3,000 for the children of the employee (item 5). School fees are not an exempt removal expense.

Class 1A National Insurance contributions are due on £1,500 landscape gardening costs provided by the employer (item 7). Gardening services are not an exempt removal benefit.

Total relocation expenses and benefits paid is £14,000. This is above the prescribed maximum of £8,000.

£14,000 less the expenses and benefits for item 5 and 7 (£4,500) equals £9,500.

£9,500 less the prescribed maximum of £8,000 equals £1,500.

£1,500 is the total amount of expenses and benefits on which Class 1A National Insurance contributions are due.

33. Shared benefits

SS(C)R 2001, r36

Special rules apply when calculating Class 1A National Insurance contributions for shared benefits.

A shared benefit can be made available:

• for use by 2 or more employees at the same time
• to one employee by reason of 2 or more employed earners’ employments with the same or different employers

If the benefit provided is a shared car, read the example in booklet Expenses and benefits for directors and employees — a tax guide: 480.

In all other cases, use the figure you’ve entered on form P11D or taxed through the payroll for each employee’s share of the cash equivalent of the benefit, to work out the amount of Class 1A National Insurance contributions due.

34. Shares and other securities

You can find details of when Class 1 National Insurance contributions are due on shares and other securities in booklet CWG2: Further guide to PAYE and National Insurance contributions. In some circumstances, however, section 446S of ITEPA 2003 can apply where an employee acquires shares or other securities for less than the market value.

The difference between what the employee pays for the securities and the market value of the securities is treated as an interest-free loan. Income Tax may be due on the benefit from that interest-free loan. Where Income Tax is due a Class 1A National Insurance contributions liability arises on the same amount that’s chargeable to Income Tax.

35. Staff suggestions

If staff suggestion awards meet the conditions set out in section 321 ITEPA 2003, no National Insurance contributions are due.

If the conditions are not met, the National Insurance contributions liability will depend upon the nature of the award.

Where the award is a:

• cash payment or a non-cash voucher, Class 1 National Insurance contributions are due
• benefit, Class 1A National Insurance contributions are due
• combination of cash, non-cash voucher and benefit:
  • Class 1 National Insurance contributions are due on the cash and the non-cash voucher
  • Class 1A National Insurance contributions are due on the benefit

Part 6 — third party benefits

This part provides guidance on National Insurance contributions due on cash payments, vouchers and benefits provided to employees by someone other than their employer. These are normally referred to as third party awards.

You’ll need to know about these special rules if:

• you provide any type of award to individuals who are employed by someone else, or to a member of their family or household
• your employees, or members of their family or household, receive any type of award from someone other than you

‘Employee’ in the remainder of this part of the guide means ‘an employee or a member of their family or household’.

36. National Insurance contributions due on third party awards

SSCBA 92, s10ZA and ZB

The National Insurance contributions liability on any third party award depends on:

• the type of award
• if as an employer, you’ve arranged or facilitated provision of the award with the third party — read paragraph 37.

These rules do not cover payments by third party customers as a reward for services given in the performance of the duties of the employment, for example, tips.

You can read more information about running payroll.

Where a third party gives an employee a cash payment, a cash voucher or a benefit that normally attracts a Class 1 liability, that award will be liable for Class 1 National Insurance contributions.

Where a third party provides an employee with a benefit that normally attracts a Class 1A liability or a non-cash voucher, that award will be liable for Class 1A National Insurance contributions.

You, as an employer, are responsible for reporting the details and for paying National Insurance contributions that are due where:

• you arrange or facilitate the provision of awards for your employees from a third party which is liable for Class 1A National Insurance contributions
• a third party provides an award to your employees which is liable for Class 1 National Insurance contributions

The third party is responsible for reporting the details of the award and for paying National Insurance contributions that are due where:

• they have provided the award
• an award is liable to Class 1A National Insurance contributions
• you, the employer, have not arranged or facilitated the provision of the award for your employees

Any non-cash voucher awarded to an employee by a third party which has not been arranged with the employer is liable for Class 1A National Insurance contributions.

More information on those benefits which are liable for Class 1 National Insurance contributions is available in booklet CWG2: Further guide to PAYE and National Insurance contributions.

37. What does arranged or facilitated mean

If you, as an employer, play some active part in providing the award this will normally constitute you having arranged or facilitated the award. This may involve you asking the third party to make the award, sharing or underwriting the cost of the award or otherwise helping to provide the award.

You will not be regarded as arranging or facilitating the award where you’re asked by the third party to give them a list of employees for the third party to provide awards. This may happen where third parties run incentive campaigns and they make awards to your employees.

38. Third party awards liable for Class 1 National Insurance contributions

Where a third party provides an employee with a cash payment, a cash voucher or a benefit that normally attracts a Class 1 liability, that award will be liable for Class 1 National Insurance contributions. Where Class 1 National Insurance contributions are due, you the employer, and not the third party, are responsible for paying the National Insurance contributions due.

More information on those benefits which are liable for Class 1 National Insurance contributions is available in booklet CWG2: Further guide to PAYE and National Insurance contributions.

39. Third party awards liable for Class 1A National Insurance contributions

An award will be liable for Class 1A National Insurance contributions where:

• a third party provides an employee with a benefit or a non-cash voucher
• you, as the employer, have not arranged or facilitated the provision of the award for your employees

Where Class 1A National Insurance contributions are due, the third party is responsible for paying these National Insurance contributions that are due.

40. Awards not liable for National Insurance contributions

Some third party benefits, such as small gifts and general goodwill entertaining, are exempt from tax and National Insurance contributions.

More information on those benefits exempt from tax and National Insurance contributions are contained in booklet CWG2: Further guide to PAYE and National Insurance contributions.

41. Paying tax on behalf of an employee

SSCBA 92, s10ZA(2)

Where a third party is liable to pay Class 1A National Insurance contributions on an award made to an employee and pays an employee’s tax on that award, the third party is liable for Class 1A National Insurance contributions on the amount of tax they pay on behalf of the employee.

The third party should:

• tell you
• contact HMRC Incentive Award Unit at the address in paragraph 42

You have to pay Class 1 National Insurance contributions on the amount of tax paid by the third party, where a third party pays the employee’s tax on an award. You would be liable to pay either:

• Class 1 National Insurance contributions
• Class 1A National Insurance contributions because you, as the employer, arranged or facilitated the provision of the award

42. Reporting and paying Class 1A National Insurance contributions on third party awards

If the third party has previously contacted our Incentive Award Unit about reporting and paying Class 1A National Insurance contributions, the unit will automatically send them an end of year pack containing the end of year return and a payslip to pay Class 1A National Insurance contributions and any tax due.

If they do not already have a Taxed Award Scheme the third party should contact the Incentive Award Unit at the following address:

National Insurance Contributions and Employer Office
HM Revenue and Customs
BX9 1BX
United Kingdom

You can contact the unit by telephone on 03000 200 3200.

You can email the unit at incentive.awards@hmrc.gov.uk

The unit will provide details of the scheme.

Payment of Class 1A National Insurance contributions and any tax due must be made to the HMRC Accounts Office by 19 July or 22 July if payment is made by an approved electronic method.

Part 7 — decisions and appeals against all Class 1A National Insurance contributions

If we do not agree with you on a Class 1A National Insurance contributions issue we’ll explain why and offer you a review. If you still think our decision is wrong you’ll then have a further 30 days to either:

• accept the offer of review
• notify the appeal to the independent tribunal, who’ll arrange for it to be heard

Reviews are completed by officers not previously involved in the decision. If you opt for a review but disagree with the review conclusion you’ll have a further 30 days in which to appeal to the tribunal.

You can get more information about how to get a review of an HMRC decision.

Part 8 — terms used in this guide

This part explains some of the main terms used in this guide.

43. Business use

The expression ‘business use by the employee’ means necessary use by the employee wholly and exclusively in the performance of the employee’s duties or, as the context requires, in qualifying business travel of the employee. Read booklet Tax and National Insurance contributions for employee travel: 490 for more information.

44. Child

The term ‘child’ as used in this guide means a child not exceeding the age of 16 for whom the employee has parental responsibility.

45. Director

ITEPA 2003 s67(1) and (2)

The term ‘director’ includes all company directors and any person, other than a person who’s merely a professional adviser (for example, a solicitor who gives advice) in accordance with whose instructions the directors are accustomed to act.

It also includes the members of a company whose affairs are managed by those members themselves and a member of a committee which manages an unincorporated association.

46. Director’s earnings

SSCBA 92, s10(1)(a) and (b), ITEPA 2003, s216(2) and (3)

Even if a director receives no earnings in the relevant tax year, a Class 1A National Insurance contributions liability will still arise on any benefit provided to the director if the:

• benefit is chargeable to tax under ITEPA 2003 on an amount of general earnings as defined at section 7(3) ITEPA 2003
• employment is ‘employed earner’s employment’

47. Directors and employees with no earnings

SSCBA 92, s10(2)(b)

Where a director or employee is provided with a benefit but no other earnings, Class 1A National Insurance contributions are payable by the person who would have been liable to pay employer Class 1 National Insurance contributions had the benefit been earnings on which Class 1 National Insurance contributions are due.

48. Reserved for later use

49. Employees and employed earner

SSCBA 92, s2(1)(a)

The term ‘employee’ as used in this guide means an employed earner and includes:

• all directors
• employees

The term ‘employed earner’ used in this guide means a person who’s gainfully employed in the UK, either under a contract of service, or in an office (including elective office) with general earnings chargeable to Income Tax under ITEPA 2003.

‘Employee director’ means a director who has no material interest in the company. Information about what is meant by material interest at Employment Income Manual EIM20212 or telephone the Employer Helpline on 0300 200 3200.

50. Reserved for later use

51. Extra-statutory concessions

Extra-statutory concessions are minor relaxations in the law which ordinarily deal with minor or transitory anomalies where a statutory remedy would be difficult or costly to introduce.

Extra-Statutory Concessions has a full list of our concessions and those relating specifically to benefits are included in booklet Expenses and benefits for directors and employees — a tax guide: 480.

52. Family or household

The term ‘family or household’ covers the director’s or employee’s:

• spouse or civil partner
• children and their spouses or civil partners
• parents
• servants, dependants and guests

53. PAYE Settlement 53. PAYE Settlement Agreements (PSAs)

A PAYE Settlement Agreement (PSA) is an agreement between you and HMRC where you agree to pay the tax due on certain payments and benefits which you give to your employees.

PSAs normally apply to certain payments and benefits that are:

• minor
• given on an irregular basis
• provided in circumstances where it’s impracticable to apply PAYE or report benefits on form P11D, or to apportion the benefits shared by a number of employees

Where you enter into a PSA, Class 1B National Insurance contributions will be payable by you on the total value of the:

• payments and benefits covered by the PSA which would normally give rise to a Class 1 National Insurance contributions or Class 1A National Insurance contributions liability
• tax payable by you under the PAYE Settlement Agreements

More information on the types of benefits that can be included in a PSA and how you can apply for one are included in booklet CWG2: Further guide to PAYE and National Insurance contributions.

Part 9 — Class 1A National Insurance contributions arising on termination awards

Section 1 of the National Insurance contributions (Termination Awards and Sporting Testimonials) Act 2019 introduces a new employer Class 1A National Insurance contributions charge on termination awards above a £30,000 threshold that have not already been subjected to Class 1 National Insurance contribution deductions.

A termination award is a payment made to an employee as compensation for the loss of their employment.

Some monies paid when a person’s employment is terminated (for example, bonuses or holiday pay) may be classed as earnings and are subject to Class 1 National Insurance contributions only. From April 2017 this included amounts that are deemed to be ‘Post Employment Notice Pay’, under the Finance Act 2016. This legislation states that payments made to cover a notice period are treated as earnings for both Income Tax and Class 1 National Insurance contributions.

Benefits in kind gifted to an employee as part of termination of employment

Where a benefit in kind is given as part of the termination package and the employee assumed ownership of it (for example, a company car) the employer must apply the cash equivalent value of the asset and subject the amount to Class 1A National Insurance contributions. You should report the Class 1A on a real time Full Payment Submission (FPS).

Benefits in kind provided to an employee for continued use as part of termination of employment

Where a benefit in kind is provided for the employee’s personal use for a period of time following the termination of their employment (for example, permitted continued use of the company car for a time after the end of employment), then you will need to apportion the benefit that arises in the tax year in which the termination of employment falls.

The benefit in kind relating to the earlier part of the year before the termination of employment needs to be reported on the employee’s P11D. The benefit in kind relating to the time after the employment has ended needs to be reported using the P11D(b) process. If a benefit in kind is provided in a subsequent tax year, the employer should also report the resulting Class 1A National Insurance contributions arising on that benefit in kind using the usual P11D(b) process. This should be done even if the provision of the benefit in kind extends beyond the tax year in which the employment was terminated.

When a termination award comprises of cash payments and the gifting of an asset, such as the employee retaining the company car as their own property, then the £30,000 threshold must be applied to the cash element first of all and any available balance should then be applied against the cash equivalent value of the asset gifted to the employee.

For example, if the employee receives a £25,000 cash payment and a company car worth £10,000 then you should set the £30,000 exemption against the cash element first. This leaves £5,000 of the remaining exemption left over to be set against the cash equivalent value of the car, A Class 1A liability will arise on that £5000 sum. The Class 1A liability for the gift of an asset should be reported on an FPS through RTI.

Example 1

Mick’s employer terminates his employment. The employer provides Mick with a termination package worth £115,000 made up of:

• A — earnings up to the date of termination — £35,000
• B — compensation for not having to work a notice period — £15,000
• C — a company car gifted to Mick by his employer, cash equivalent value — £10,000
• D — compensation for loss of employment — £55,000

Class 1 National Insurance contributions are due on the £50,000 earnings (A plus B).

Class 1A National Insurance contributions are due on cash or cash equivalent termination award (C plus D) after the £30,000 exemption has been applied to that amount.

In this example, C plus D is £65,000. The £30,000 exemption would be applied on this total and the Class 1A contributions worked out in the following way.

£65,000 - £30,000 = £35,000

£35,000 × 13.8% (the current percentage rate for Class 1A National Insurance contributions) = £4,830

£4,830 would be the total Class 1A National Insurance contributions payable on this termination award.

The Class 1A National Insurance contributions must be paid and reported through RTI on or before the payment of the award is paid to Mick. It must not be paid and reported through the annual P11D(b) process.

Example 2

Peter has his employment terminated during the 2021 to 2022 tax year. His employer provides him with a termination award package with a total value of £85,000. The termination award package is made up of:

• E — earnings up to date of leaving and holiday pay — £10,000
• F — compensation for not having to work a notice period — £15,000
• G — continued use of his company car for 12 months after his termination date — the benefit in kind is calculated as:
  • benefits in kind arising on Peter’s company car in 2021 to 2022 tax year — £10,000 (relating to the time after his employment ended)
  • benefits in kind arising on Peter’s continued use of his company car in the 2022 to 2023 tax year — £10,000
• H+ — compensation for loss of employment — £40,000

Class 1 National Insurance contributions are due on the £25,000 earnings (E plus F).

The termination award consists of £40,000 (H+). The £30,000 termination threshold is applied against (H+) leaving a balance of £10,000 liable to Class 1A National Insurance contributions at current annual rate (13.8%). Multiplying the £10,000 balance by the current Class 1A rate would mean that there is total of £1,380 Class 1A National Insurance contributions due on the termination award.

The £1,380 must be paid and reported through real time (RTI), on or before that termination award is paid, and not through the annual P11D(b) process.

Class 1A National Insurance contribution liabilities arising on the provision of a company car after the employment ends in the 2021 to 2022, and 2022 to 2023 tax years must be paid and reported through the P11D(b) process. Additionally, any company car benefit relating to the time up to the date the employment ended should be included on the P11D and the related Class 1A National Insurance contributions should feed through to the P11D(b) as usual.

Reporting

When the termination award falls within the rules outlined in the previous 2 examples, Class 1A liabilities arising on termination awards in excess of the £30,000 threshold must be reported to HMRC.

How the Class 1A liability for benefits in kind included in a termination package must be reported depends on the benefit and how it is provided. If the benefit:

• consists of an asset gifted to the employee as part of the termination, you need to report the Class 1A on a real time Full Payment Submission (FPS), along with the Class 1A on any cash termination awards
• is the provision of an asset without the transfer of ownership in it or the provision of a service, then you should report the Class 1A on the benefit using the P11D(b) process

Reporting on a real time Full Payment Submission (FPS)

You should report the Class 1A liabilities to HMRC online through real time reporting, on or before the time you make the termination award. You will need to use your PAYE scheme to do this.

You need to make sure that termination awards where Class 1A National Insurance contributions are due are reported separately from amounts which are classed as earnings and are subject to Class 1 National Insurance contributions. As of 6 April 2020, the real time Full Payment Submission has separate data items for reporting each of these Class 1 and Class 1A liabilities.

The P11D(b) process 

You should report Class 1A liabilities under the P11D(b) process if an asset is provided to the employee without transferring ownership in it for some time after the termination or if you provide an ongoing benefit which does not consist of an asset (such as continued provision of private medical insurance) after the date of termination of employment. 

To report the Class 1A liabilities, you need to calculate the annual value of the benefit in kind (using the same benefit in kind valuation rules you would use for active employees). You should then enter this amount as an adjustment on your P11D(b) to report the Class 1A liabilities (see CWG5 Part 1 Paragraph 18). 

Note that for tax purposes, you may also need to inform HMRC of the termination package under Regulation 91 (Income Tax (Pay As You Earn) Regulations 2003).

Do not report Class 1A National Insurance contribution liabilities arising on cash, or cash equivalent termination awards by using the annual P11D(b) process. The P11D(b) process is only applicable for reporting Class 1A liabilities arising on benefits in kind.

Penalties

Existing Real Time Information penalties apply for those Class 1A liabilities being reported through Real Time Information.

Interest

If you pay late or if an underpayment of Class 1A National Insurance contributions is discovered then you may have to pay interest on the outstanding amount.

Part 10 — Termination awards and sporting testimonials

Section 3 of the National Insurance contributions (Termination Awards and Sporting Testimonials) Act 2019 introduces a new Class 1A charge on certain sporting testimonial payments from 6 April 2020 onwards.

A sporting testimonial is a one-off event, or a series of related events, held for the benefit of sportspersons who have played for a certain sports club for a long time.

The testimonial is usually held to raise money for the sportsperson before or after their playing career ends. Sometimes the sportsperson may elect for some, or all, of the testimonial proceeds to be donated to charitable causes.

Any payment paid to a sportsperson from the proceeds of a testimonial is earnings for both income tax and Class 1 National Insurance contributions purposes if:

• a sportsperson has a clause within their employment contract to be awarded a testimonial by their employer
• there is a customary expectation that the sportsperson will be entitled to a testimonial

Before April 2017, non-contractual and non-customary sporting testimonial payments paid to a sportsperson were not liable to income tax or National Insurance contributions. However, changes to the tax treatment of these types of sporting testimonial payments were implemented from April 2017 following legislation introduced by the Finance Act 2016. This confirmed that while income from non-contractual, non-customary sporting testimonials arranged by a third party (such as a sporting testimonial committee) would become taxable, there would be a generous £100,000 exemption to ensure that this change had a limited impact on the sportsperson.

From 6 April 2020, the National Insurance contributions treatment of sporting testimonial payments arising from non-contractual and non-customary sporting testimonials (arranged by a third party) are closely aligned with the tax position.

From April 2020, non-contractual and non-customary testimonials arranged by third parties are subject to a Class 1A National Insurance contributions liability on any amount of testimonial payment above the £100,000 threshold. The third party sporting testimonial committee will be liable to pay and report the Class 1A National Insurance contributions liability through real time reporting, on or before the testimonial payment (on which that Class 1A liability arose) has been paid to the sportsperson.

This type of sporting testimonial payments will not be subject to employee or employer Class 1 National Insurance contributions. This is to ensure the sportsperson is not adversely affected by the changes to the National Insurance contributions treatment of testimonial payments. HMRC expect that the majority of sporting testimonials will be unaffected as the proceeds they raise for the sportsperson will not exceed the £100,000 threshold.

The sportsperson can still make tax and National Insurance contributions free charitable donations from the payments they received for their sporting testimonial. If the sporting testimonial committee make the charitable donations through the payroll giving provisions, then any tax and Class 1A National Insurance contributions liability that arises on the testimonial payment will be reduced.

For example, if the proceeds from sporting testimonial to be paid to the sportsperson are £200,000, you would then minus the exempt amount (£100,000), which gives a total of £100,000.

The sportsperson then donates £25,000 to charity through payroll giving to leave a total of £75,000.

The amount of testimonial payment liable to income tax and Class 1A National Insurance contributions in this instance is £75,000.

Non-customary and non-contractual

Guidance on how to decide if a sporting testimonial is customary or contractual can be found in the Employment Income Manual page 64120.

Example 1

Cheryl is a professional footballer whose career has been ended by an injury. She had no expectation of receiving a testimonial as there was nothing in her contract and her club do not usually offer testimonials to players whose careers end.

The testimonial match for her brings in £85,000 for her benefit. There will be no Class 1A charge on the proceeds as they do not exceed the threshold of £100,000.

Example 2

Lorraine is a professional footballer who has worked tirelessly for charities in her local area and is seen as a pillar of the community. When she ends her career she is offered a testimonial by her club who do not normally do this and there was nothing in her contract about this.

Because the testimonial is a reward for her personal qualities rather than stellar performance at her ‘job’ there is no question of this being a reward for good performance and any payments being treated as a bonus from her employment.

The testimonial match and a series of events linked to it raise a total of £350,000 after all of the expenses of the Testimonial Committee have been settled.

The first £100,000 of the proceeds are not subject to Class 1A National Insurance contributions (or tax) due to the exemption introduced by the legislation. Class 1A National Insurance contributions are payable on £250,000 and should be reported through RTI.

Payment and reporting of Class 1A liabilities on sporting testimonial payments

When the sporting testimonial falls within the post April 2020 rules, testimonial payments in excess of £100,000 will incur a Class 1A liability which must be paid and reported to HMRC.

The payment and reporting requirements are placed on the independent testimonial committee who have arranged the testimonial, as they are treated as being the secondary contributor (employer) for this purpose.

If you are a testimonial committee, you should report the Class 1A liability through real time reporting, on or before the time you make the testimonial payment to the sportsperson, you will need register for a PAYE scheme to enable you to do this.

You must have a PAYE scheme before you can make payments to the sportsperson.

As of 6 April 2020 onwards, there is a data item is included in an RTI Full Payment Submission for reporting any Class 1A National Insurance contributions liabilities arising on a sporting testimonial payment.

Do not report Class 1A National Insurance contributions paid on sporting testimonial payments using the annual P11D(b) process. This process must only be used for reporting Class 1A liabilities arising on benefits in kind.

You can register with HMRC for a PAYE scheme up to 2 months before you start making testimonial payments to a sportsperson. You can read about the Basic PAYE Tools on GOV.UK, which help you to meet your PAYE payment and reporting obligations.

Read about telling HMRC about a new employee.

Penalties

Existing RTI penalties shall apply for those class 1A liabilities being reported through RTI.

Interest

If you pay late, or if an underpayment of Class 1A National Insurance contributions is discovered either by you or by us, you may have to pay interest on the amount outstanding.

Appendix 1 — taxable benefits and expenses liable for Class 1A National Insurance contributions

The table in this section shows you if Class 1 or Class 1A National Insurance contributions are due on the most common types of expenses and benefits that can be made to your employees and describes how they should be reflected on form P11D in ordinary circumstances.

You should read any note that a relevant table entry refers you to. These are listed at the end of the table.

The table is not comprehensive and has no legal force. It gives guidance only.

Some entries will refer you to more detailed guidance elsewhere. This may be because special conditions apply to that type of expense or benefit.

National Insurance treatment of common expenses and benefits

If the table does not show the type of payment you’re making, or you’re not sure if a payment attracts a Class 1 or a Class 1A National Insurance contributions liability, phone the Employer Helpline on Telephone: 0300 200 3200.

More guidance about National Insurance contributions on expense payments is in booklet CWG2: Further guide to PAYE and National Insurance contributions.

Optional remuneration arrangements

Benefits provided under optional remuneration arrangements (OpRA) are not covered by existing exemptions except in limited circumstances. Where this is the case Class 1 or Class 1A National Insurance contributions are due as appropriate.

There are a number of exceptions to this where the exemptions continue to apply when the benefit is provided under OpRA so no National Insurance contributions are due. These are where the benefit is:

• childcare vouchers, the provision of a workplace nursery and directly contacted employer provided childcare
• counselling

Type of expense or benefit provided	Circumstances	Class 1 National Insurance contributions due include in gross pay	Class 1A National Insurance contributions due	Enter on P11D at section
Assets placed at the employee’s disposal	provided for business use, and private use is not significant — read paragraph 13	No	No	L — see note 1
Assets placed at the employee’s disposal	provided for mixed business and private use	No	Yes	L
Assets transferred to the employee but not Readily Convertible Assets	can be turned into cash only by sale, such as furniture, kitchen appliances, property and clothes	No	Yes	A
Car fuel for private motoring in a company car	any means of supply or purchase — read booklet Expenses and benefits for directors and employees — a tax guide: 480 for exceptions	No	Yes	F
Car or van fuel for private motoring in a privately-owned car or van	supplied using a company credit card, garage account or agency card and the conditions described in booklet CWG2: Further guide to PAYE and National Insurance contributions apply	No — see note 2	Yes	M
Car or van fuel for private motoring in a privately-owned car or van	from your own fuel pump	No	Yes	M
Car or van fuel for private motoring in a privately-owned car or van	any other circumstances	Yes	No	E or M
Car parking facilities, including motorcycles	at or near place of work as long as not provided under OpRA	No	No	—
Car parking facilities, including motorcycles	elsewhere — unless the parking is part of a journey which is qualifying business travel	No	Yes	K, L or M
Car parking fees paid for or reimbursed to employee	at or near place of work as long as not provided under OpRA	No	No	—
Car parking fees paid for or reimbursed to employee	for business related journeys	No	No	N
Car parking fees paid for or reimbursed to employee	in all other circumstances	Yes	No	N
Cars made available for private use	read booklet Expenses and benefits for directors and employees — a tax guide: 480	No	Yes	F
Childcare help (does not include vouchers — read separate entry below) provided by employer for children up to age 16 (excluding school fees — read separate entry on school fees)	your contract with the provider: variable up to £55 per week (£243 per month) where the qualifying conditions are met — read paragraph 29	No	No	—
Childcare help (does not include vouchers — read separate entry below) provided by employer for children up to age 16 (excluding school fees — read separate entry on school fees)	all values in excess of £55 per week (£243 per month) where the qualifying conditions are met	No	Yes	M
Childcare help (does not include vouchers — read separate entry below) provided by employer for children up to age 16 (excluding school fees — read separate entry on school fees)	any amount not meeting the conditions	No	Yes	M
Childcare help provided by employer for children up to age 16	you provide a nursery at the workplace (or in a facility managed and financed by you)	No	No	—
Childcare help provided by employer for children up to age 16	you reimburse the employee or provide additional salary to meet the cost of childcare	Yes	No	—
Christmas boxes	in cash	Yes	No	—
Christmas boxes	in goods	No	Yes	A, M
Clothing or uniforms which can be worn at anytime	provided by you, read booklet CWG2: Further guide to PAYE and National Insurance contributions	No	Yes	A, M
Clothing or uniforms which can be worn at anytime	employee contracts — see note 4	Yes	No	B, M
Clothing (protective) or uniforms may have a logo which are necessary for work	all circumstances	No	No	—
Council Tax	employee provided with accommodation which is within one of the categories where the value does not have to be included for tax purposes on form P11D, read booklet CWG2: Further guide to PAYE and National Insurance contributions	No	No	—
Council Tax	all other circumstances, including where provided under OpRA	Yes	No	B
Credit cards, charge cards, employee uses your card to purchase	goods or services bought on your behalf and the conditions described in booklet CWG2: Further guide to PAYE and National Insurance contributions apply	No	No — note 2	—
Credit cards, charge cards, employee uses your card to purchase	items for the personal use of the employee	Yes	No	C
Credit cards, charge cards, employee uses your card to purchase	items relating to specific and distinct business expenses actually incurred by the employee	No	No	C
Employee’s liability insurance	read booklet CWG2: Further guide to PAYE and National Insurance contributions for conditions	No	No	—
Entertaining clients expenses or allowances	all circumstances	No	No	N
Entertaining staff expenses or allowances	employer contracts — see note 5	No	Yes	K, L or M
Entertaining staff expenses or allowances	employee contracts — see note 4	Yes	No	N
Expenses and benefits covered by an exemption unless provided under OpRA		No	No	—
Expenses not covered by an exemption	specific and distinct business expenses included in the payment	No	No	See note 6
Expenses not covered by an exemption	any profit element in the payment	Yes	No	—
Eyecare test or corrective appliance (for example, glasses or contact lenses)	employer makes available generally to employees for whom tests and appliances are necessary under regulations made under the Health and Safety at Work Act 1974 and so on	No	No	—
Eyecare voucher to obtain test or corrective appliance (for example, glasses or contact lenses)	employer makes available generally to employees for whom tests and appliances are necessary under regulations made under the Health and Safety at Work Act 1974 and so on	No	No	—
Food, groceries, farm produce	employer contracts — see note 5	No	Yes	A
Food, groceries, farm produce	employee contracts — see note 4	Yes	No	B
Goods, such as TV, furniture and so on, transferred to employee	employer contracts — see note 5	No	Yes	A
Goods, such as TV, furniture and so on, transferred to employee	employee contracts see note 4	Yes	No	B
Holidays	employer contracts — see note 5	No	Yes	A, K, L or M
Holidays	holiday vouchers	Yes	No	C
Holidays	employee contracts see note 4	Yes	No	B
Incidental overnight expenses	read paragraph 31 and booklet Expenses and benefits for directors and employees — a tax guide: 480 for special conditions	No	No	—
Income Tax paid	but not deducted from employee	Yes	No	M
Income Tax paid	on notional payments not borne by employee within 90 days of the end of the tax year	Yes	No	B
Insurance premiums for pensions, annuities and so on, on the employee’s death or retirement. Read CWG2: Further guide to PAYE and National Insurance contributions for exceptions	employee contracts see note 4	Yes	No	B
Living accommodation provided by you	read booklet CWG2: Further guide to PAYE and National Insurance contributions for special conditions and not under OpRA	No	No	—
Living accommodation provided by you	in all other circumstances and where provided under OpRA	No	Yes	D
Loans, beneficial arrangements	qualifying loans	No	No	—
Loans, beneficial arrangements	non-qualifying loans	No	Yes	H
Loans written off	at time you decide not to seek repayment	Yes	No	M
Long service award	conditions of S323 ITEPA 2003 met	No	No	—
Long service award	above conditions not fully met or provided under OpRA	For the treatment applicable to National Insurance contributions, read the instructions at paragraph 35 ‘Staff suggestions’, which apply similarly for long service awards	—	—
Meal vouchers	vouchers redeemable for meals only (all values)	Yes	No	C
Meals provided by you	A canteen open to your staff generally or on your business premises on a reasonable scale and all employees may obtain free or subsidised meals, as long as the meals are not provided in connection with salary sacrifice or flexible remuneration arrangements	No	No	—
Meals provided by you	in all other circumstances	No	Yes	M
Medical, dental and so on, treatment or insurance to cover such treatment	employer contracts — see note 5	No	Yes	I
Medical, dental and so on, treatment or insurance to cover such treatment	employee contracts see note 4	Yes	No	B
Medical, dental and so on, treatment or insurance to cover such treatment	outside the UK where the need for treatment arises while the employee is outside the UK working for you	No	No	—
Mobile phones provided by you	employer contracts — see note 7	No	No	—
Mobile phones costs of private calls	employer contracts — see note 5	No	No	—
Mobile phones costs of private calls	employee contracts — see note 4	Yes	No	B, M or N
Mobile phone vouchers provided by you	for use by employee to obtain one mobile phone for private use and not under OpRA	No	No	—
Office accommodation, supplies or services used by employee in doing their work and not under OpRA		No	No	—
Personal bills of the employee paid by you	employee contracts see note 4	Yes	No	B
Phones — you are the subscriber	cost of rental, unless private use is not significant	No	Yes	K or M
Phones — you are the subscriber	cost of calls, unless private use is not significant	No	Yes	K
Phones — you are the subscriber	cost of all private calls is reimbursed by the employee	No	No	K, L or M
Phones — your employee is the subscriber, and you meet the costs of calls and or rental	phones used exclusively for business	No	No	B or N
Phones — your employee is the subscriber, and you meet the costs of calls and or rental	phones used exclusively for private use see note 4	Yes	No	B or N
Phones — your employee is the subscriber, and you meet the costs of calls and or rental	phone used for both business and private purposes	Rental — Yes on the full amount of the rental	No	B or N
Phones — your employee is the subscriber, and you meet the costs of calls and or rental	phone used for both business and private purposes	Calls — Yes on the full amount. Business calls, supported by evidence, can be excluded	No	B or N
Readily Convertible Assets (RCA), securities and or remuneration provided in a noncash form, for example, shares share options and commodities	read paragraph 34 and CWG2: Further guide to PAYE and National Insurance contributions for detailed information	Yes	No, but read paragraph 34 for detailed information	—
Relocation expenses or benefits	expenses which are not exempt — see note 8	Yes	No	N
Relocation expenses or benefits	benefits which are not exempt and exempt expenses paid after the relevant day — see note 9	No	Yes	M
Relocation expenses or benefits	exempt expenses or benefits of £8,000 or less and not under OpRA — see note 9	No	No	—
Relocation expenses or benefits	exempt expenses or benefits in excess of £8,000 — see note 9	No	Yes	J
Retirement benefit schemes, either registered schemes or employer financed schemes	payments you make into such schemes	No	No	—
Round sum allowances	specific and distinct business expense identified	No	No	See note 10
Round sum allowances	profit element	Yes	No	See note 10
Scholarships awarded to students because of their parent’s employment	employer contracts see note 5	No	Yes	M
Scholarships awarded to students because of their parent’s employment	employee contracts see note 4	Yes	No	M
School fees	employer contracts — see note 5	No	Yes	M
School fees	employee contracts — see note 4	Yes	No	M
Securities or an interest in securities	read RCA	—	—	—
Shares	read RCA	—	—	—
Shares and share options (not RCA)	—	No	No	—
Social functions	conditions of s264 ITEPA 2003 are satisfied	No	No	—
Social functions	all other types of function	No	Yes	M
Sporting or recreational facilities provided by you, for example, fishing, horse racing	conditions of s261 ITEPA 2003 are satisfied and not under OpRA	No	No	—
Sporting or recreational facilities provided by you, for example, fishing, horse racing	all other circumstances	No	Yes	K
Subscriptions, professional and fees which are allowable tax deductions under s343 and s344 ITEPA 2003 — read paragraph 30	all other circumstances	No	No	—
Subscriptions, professional and fees which are not allowable tax deductions under s343 and s344 ITEPA 2003	employer contracts — see note 5	No	Yes	M
Subscriptions, professional and fees which are not allowable tax deductions under s343 and s344 ITEPA 2003	employee contracts see note 4	Yes	No	M
Suggestion schemes awards to employees	conditions of s321 ITEPA 2003 met — read paragraph 35	No	No	—
Suggestion schemes awards to employees	above conditions not fully met	Read paragraph 35	—	—
Third party benefits or payments	read paragraphs 36 to 42	—	—	—
Training payments for course fees, books and so on	training is work-related or encouraged or required by you in connection with the employment	No	No	—
Training payments for course fees, books and so on	all other circumstances and employer contracts — see note 5	No	Yes	M
Training payments for course fees, books and so on	all other circumstances and employee contracts — see note 4	Yes	No	M
Vans available for commuting and other private use	other private use is more than insignificant — read booklet Expenses and benefits for directors and employees — a tax guide: 480	No	Yes	G
Van fuel provided for use in vans available for commuting and other private use	all means of supply. Other private use is more than insignificant. Read booklet Expenses and benefits for directors and employees — a tax guide: 480	No	Yes — see note 11	G
Vouchers	read booklet CWG2: Further guide to PAYE and National Insurance contributions for exceptions	Yes	No	C

Notes

1. Where assets (apart from vehicles, boats, aircraft and certain improvements or extensions to living accommodation) and services are made available to employees to use for work on your premises or elsewhere, and there’s only a small amount of incidental private use, no Class 1A National Insurance contributions will be due.
2. Where an employee purchases goods or services including car fuel on your behalf, and you transfer ownership of these to the employee, Class 1A National Insurance contributions will be due.
3. Enter at the section shown unless you registered online before the start of the tax year and have been payrolling the benefit. If you did not register online but you’ve taxed it through the payroll, you need to report the benefit on form P11D and write on or mark up form P11D to show which benefits have been payrolled.
4. Contract is between the employee and the provider. The employer pays the provider or reimburses the employee. Payments to the provider should be returned on form P11D as shown. Reimbursements to the employee are subject to PAYE and do not need to be returned on form P11D. These payments are simply meeting the employees debt and are therefore liable for Class 1 National Insurance contributions.
5. Contract is between you, the employer, and the provider of the benefit.
6. Specific and distinct business expenses may feature in a number of payments you make to employees and should only be recorded in the appropriate form P11D section where not covered by an exemption.
7. There’s no limit to the number of mobile phones that may be provided National Insurance contributions-free solely for business use and on which private use is not significant. Only one mobile phone per employee may be provided National Insurance contributions-free for private use. No mobile phone may be provided National Insurance contributions-free to a member of an employee’s family or household. Read Employment Income Manual EIM21778.
8. Expenses which are not exempt are any expenses not included in the list of booklet Expenses and benefits for directors and employees — a tax guide: 480. You’ll need to return on form P11D any amounts your employee should have paid, but you (the employer) paid instead.
9. Details of what constitutes exempt expenses and benefits are described in booklet Expenses and benefits for directors and employees — a tax guide: 480.
10. Round sum allowances may feature in a number of payments you make to employees and should be recorded in the appropriate P11D section.

11. Class 1A National Insurance contributions are not due and do not need to be reported on the P11D if the van is:

    • available to the employee for business travel and commuting
    • not used for any other private purpose except to an insignificant extent
    • available to the employee mainly for use for the employee’s business travel

Appendix 2— useful forms and guidance issued by HMRC

You may find the following guides useful for understanding Class 1 and Class 1A National Insurance contributions liabilities and how to report them to us:

• Expenses and benefits for directors and employees — a tax guide: 480
• Tax and National Insurance contributions for employee travel: 490
• PAYE: end-of-year expenses and benefits (P11D)
• PAYE: end-of-year expenses and benefits (P11D(b))

Help and guidance

You can get help and guidance from the following sources.

Help from GOV.UK

For help with your PAYE payroll read PAYE guidance.

For wider interactive business help, set up a business.

Webinars are a way of learning about your payroll, such as ‘Getting payroll information right’. This webinar covers the most common errors employees make when submitting information to HMRC. It shows you how to provide accurate data and avoid common payroll mistakes.

For more information, see HMRC email updates, videos and webinars for employing people.

Any page printed from the online version of this help book is uncontrolled and may not be the latest version. We recommend you always check you’re referring to the latest online version.

Online services

For information and help to sign in or register, see HMRC services online.

For more help, contact the online services helpdesk.

Basic PAYE tools

The Basic PAYE Tools (BPT) is software that you download onto your computer. It will help you run your payroll throughout the year. It’s designed for employers who have 9 or fewer employees, and you can use it to calculate payroll deductions and then report payroll information online in real time.

To find out more information about the Basic PAYE Tools and other HMRC recognised software, see find payroll software.

Employer helplines

If you have:

• been an employer for less than 3 years, Telephone: 0300 200 3211
• been an employer for 3 years or more, Telephone: 0300 200 3200
• a hearing or speech impairment, Textphone: 0300 200 3212

Tell us your employer PAYE and Accounts Office references when you contact us. You’ll find them on correspondence HMRC have sent you.

Employer help books and forms

Help books and forms are available to download, see payroll forms, tables and helpbooks for employers.

Yr laith Gymraeg

lawrlwytho ffurflenni a llyfrynnau cymorth Cymraeg, ewch i www.gov.uk/cymraeg sgroliwch i lawr i’r pennawd ‘Treth’ a dilynwch y cysylltiadau ‘Ffurflenni Cyllid a Thollau EM (CThEM)’ ac ‘Arweiniad a thaflenni gwybodaeth CThEM’.

Forms and guidance in Braille, large print and audio

For details of employer forms and guidance in Braille, large print and audio, contact the Employer Orderline on Telephone: 0300 123 1074 and ask to speak to the Customer Service Team.

Help and Support from the Digital Delivery Team

For more about our live and recorded webinars, see HMRC email updates, videos and webinars for employing people. View our video clips.

Follow us on Twitter @HMRCgovuk.

HMRC Online Customer Forum

Our HMRC Online Customer forum is for you — with all the help, support and guidance you need.

You can ask questions, see what others are asking and get the answers and top tips you need to support you in running your business

Employer bulletin online

Employer bulletins contain information and news for employers. We publish these 6 times a year. Read HMRC Employer Bulletins.

Do you use PAYE online?

Remember to keep your email address up to date. If you change your email address, update PAYE Online to make sure you continue to receive email alerts when we have issued tax codes and generic notifications.

HMRC

If you have a query about your PAYE scheme contact HMRC.

Tell us your employer PAYE and Accounts Office references when you contact us. You’ll find them on correspondence HMRC have sent you.

Your rights and obligations

The HMRC Charter explains what you can expect from us and what we can expect from you.