NIM02230 - Class 1 NICs : Earnings of employees and office holders : Medical cover

Liability for NICs is dependent on who makes the contract with the medical insurance provider.

• If the employer enters into a contract to provide private medical insurance for the workforce and pays the premiums :
  • the payments are disregarded for Class 1 NICs purposes
  • the payments will be liable for Class 1A NICs. For information regarding the general principles applying in relation to Class 1A NICs see NIM13000.
• If the employer enters into a contract to provide private medical insurance for a director/employee and the director/employee then extends that insurance to cover their family and the employer pays the whole of the premiums :
  • that part of the premium which relates to the director/employee’s family is earnings for Class 1 NICs purposes because the employer is simply meeting the employee’s debt in respect of the additional premiums; and
  • the remainder (which provides insurance cover for the director/employee) will be liable for Class 1A NICs.
• If the employee enters into a contract to provide private medical insurance and the employer agrees to pay the premiums, the employer is discharging the employee’s debt and so the payments must be included in gross pay for Class 1 NICs purposes.

See NIM02010 for general guidance regarding the meaning of “earnings”.