A recent Supreme Court decision has found that where an employer makes a payment for an employee’s benefit to, for example, a pension fund or insurance company, National Insurance Contributions (NICs) should not usually be charged. The key determining factor is whether the payments are “earnings” - they won’t be if the employee has no right to the payment itself but only to the benefit procured by the payment. In that case NICs should not be levied.

The Supreme Court suggested that earnings for NICs purposes are more narrowly defined that “emoluments” for income tax purposes. However, in many cases the rules on disguised remuneration may well apply and bring the payments within both the NICs and the income tax net in any case.