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»Ê¹ÚÌåÓýapp following examples illustrate how the fully matching deduction rule explained at NIM15500 operates. »Ê¹ÚÌåÓýapp principles explained extend to any taxable general earnings that attract Class 1A NICs liability and for which a tax deduction may be available.

Example 1

An employer arranges and pays for hotel accommodation for an employee who is required to attend a business meeting away from their normal place of work that requires an overnight stay. »Ê¹ÚÌåÓýapp cost of the hotel accommodation is £170. »Ê¹ÚÌåÓýapp employee is taxable on the amount of the hotel cost but a section 337 ITEPA 2003 deduction is available for the full cost of the accommodation, see EIM31615. As a fully matching deduction is available, Class 1A NICs are not due on the cost of the provided hotel accommodation.

Example 2

An employer arranges and pays for hotel accommodation for an employee who is required to attend a series of business meetings away from their normal place of work from Monday to Thursday. »Ê¹ÚÌåÓýapp employer also arranges for the employee to remain at the hotel on holiday for the weekend. »Ê¹ÚÌåÓýapp total cost to the employer is £1,000.

As the benefit provided is used for both business and private purposes, a fully matching deduction is not available and Class 1A NICs are due on the full amount, that is, £1,000.

Example 3

A director has use of their employer’s helicopter for both private and business journeys. »Ê¹ÚÌåÓýapp helicopter is available for the whole of the 2020 to 2021 tax year. »Ê¹ÚÌåÓýapp director is allowed unlimited private use of the helicopter, which is estimated at 30% of its entire use. When provided the helicopter had a market value of £100,000.

»Ê¹ÚÌåÓýapp cash equivalent of the benefit is calculated as follows:

£20,000 - (£100,000 x 20%) Annual value calculated under section 205 of ITEPA 2003 (see EIM21645)

+

£25,000 - (for services, fuel, repairs, etc.)

= £45,000

»Ê¹ÚÌåÓýapp cash equivalent of £45,000, reported on the P11D, is the amount on which Class 1A NICs are due. »Ê¹ÚÌåÓýapp employee is entitled to a deduction of £31,500 (£45,000 x 70%) from the cash equivalent to reflect the use in carrying out the duties of the employment. »Ê¹ÚÌåÓýapp reduction in the tax charge on the employee to £13,500 (£45,000 x 30%) does not affect the amount of Class 1A NICs due.