NIM13070 - Class 1A National Insurance contributions: Liability for Class 1A NICs: Conditions to be satisfied for liability to arise: Earner chargeable to income tax under ITEPA 2003 on amount of general earnings

Section 10(1)(a) of the Social Security Contributions and Benefits Act 1992 (SSCBA 1992)  

For Class 1A NICs liability to arise the earner, that is, the employee or director, must be chargeable to income tax under Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) on an amount of general earnings.

Most benefits chargeable under ITEPA 2003 are either general earnings or treated as such. Full guidance is contained in the Employment Income Manual. That guidance applies equally for the purposes of Class 1A NICs.

Class 1A liability only arises where the:

• benefit is general earnings or is treated as such, and
• earner is chargeable to income tax under ITEPA 2003 on those general earnings. 

It is important here to draw a distinction between the words 'charged' and 'chargeable'. In some cases, tax may not actually be charged but the benefit remains chargeable to tax. An example of this occurs where the conditions of a Double Taxation Agreement mean that the UK gives credit for another country’s tax. See NIM16425.

For the purposes of Class 1A NICs it is sufficient for an item to be chargeable to tax in the first instance, tax does not have to be paid.