Class 1 v Class 1A

Produced by Tolley in association with Vince Ashall
Class 1 v Class 1A

The following Employment Tax guidance note Produced by Tolley in association with Vince Ashall provides comprehensive and up to date tax information covering:

  • Class 1 v Class 1A
  • Class 1 and Class 1A

Class 1 and Class 1A

Class 1 and Class 1A are the categories of NIC that can be charged on expenses reimbursed and benefits provided to employees. These classes are mutually exclusive. A benefit cannot be subject to both Class 1 and Class 1A NIC. Three requirements must be met before Class 1A NIC is charged. These are that the benefits are:

  1. subject to income tax under ITEPA 2003

  2. from what is defined as an ‘employed earner’s employment’ in social security legislation, and

  3. not already subject to Class 1 NIC

See CWG5 (2015) Class 1A National Insurance contributions on benefits in kind, page 8, paragraph 4. This technical definition seems complex, so we look in practical terms in this note at how to assess which class of NIC applies.

There are several ways of providing benefits to employees. How the provision is structured generally determines which class of NIC is due. While having the incorrect structure may not necessarily have an impact on the employer, since the Cl

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