Class 1A NICs are paid by employers in respect of most benefits in kind provided to employees, for example, the use of a company car. There are no Class 1A employee contributions payable.
Class 1A NICs are due in respect of most benefits provided to:
- directors and certain other persons in controlling positions,
- members of the family or households of the above.
Where a benefit is provided as part of a salary sacrifice or other optional remuneration arrangement (OpRA), special rules apply and the Class 1A NICs are calculated as a percentage of the relevant chargeable benefit.
Certain conditions must apply before Class 1A NICs are due. These conditions are that 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 NIC liability.
There is a statutory exemption for qualifying trivial benefits in kind costing £50 or less. The tax-free exemption (and therefore exemption from Class 1A NIC) applies to small non-cash benefits like a bottle of wine or a bouquet of flowers given to employees. It also applies to any other BiK classed as 'trivial' that falls within the exemption. An annual cap of £300 is applicable to directors or other office-holders of close companies and to members of their families or households.