NIM17130 - Class 1A National Insurance contributions: Refunding Class 1A NICs: Occasions when refunds are not due: Changes to the cash equivalent of a benefit after Class 1A NICs payment date
Class 1A refunds are only due where either
- an error was made in the original Class 1A NICs calculation, see NIM17060; or
- inaccurate or incomplete information was held at the time Class 1A NICs were calculated, see NIM17080.
Class 1A NICs refunds cannot be made where a subsequent event occurs which may alter the amount on which Class 1A NICs were originally assessed. The most likely event which will alter the amount of taxable earnings after Class 1A NICs have been paid, is the late making good of a benefit by the employee. The example below illustrates this distinction.
For income tax purposes, there is no time limit within which a person can make good, see EIM21121.
If an employer will not agree that Class 1A NICs are due on the cash equivalent of the benefit, using the facts available at the time the Class 1A NICs were due to be paid, issue a decision under section 8(1) of the Social Security Contributions (Transfer of Functions, etc.) Act 1999.
Example
Employer A calculates the amount of Class 1A NICs due on the benefit derived from the use of the employer’s holiday villa in Spain, made available to two company directors during the 2020 to 2021 tax year. On 9 May 2021, one director pays £500 towards the costs of the benefit but the employer fails to take this into account when calculating and paying his Class 1A NICs on 19 July 2021. The other director pays £500 towards the cost of the benefit on 5 September 2021.
The employer is entitled to a refund of the overpaid Class 1A NICs in respect of the first director. An error occurred at the time the employer calculated his Class 1A NICs liability.
No refund is due in respect of the second director since no error occurred after Class 1A NICs were due to be paid.