In October 1985 the upper limit for an employer's liability for secondary Class 1 National Insurance Contributions was removed. As a result employers faced a substantial increase in their NIC liabilities in relation in particular to higher paid employees. Various avoidance schemes were used until amending legislation brought the schemes to an end with effect from 1st October 1998.

The schemes involved generally featured a three-cornered arrangement under which the scheme promoter sold valuable assets such as platinum, gold coins and book or trade debts to the employers, the employers transferred them as purported payments in kind to employees and the employees turned them into cash by selling them back to the promoters.

The Revenue were successful in establishing that the schemes were ineffective.

The amount on which to assess NICs will be the best estimate that the employer can reasonably make of the amount of income likely to be chargeable to tax under Schedule E and accounted for via PAYE.

In general (subject to a few minor exceptions) non-cash vouchers for which there is exemption from income tax also qualify for exemption from NIC's.

The Social Security contribution changes mirror PAYE income tax changes. Class 1A NIC are extended to most benefits in kind from 6th April 2000 by the Child Support, Pensions and Social Security Act 2000 although employer provided childcare remains exempt (see reg 40(5) of Social Security (Contributions) Regulations 2001 SI 2001/1004 and see also notes at Social Security/NATIONAL INSURANCE CONTRIBUTIONS/child care vouchers ). There are details in 2000/08/11 - Inland Revenue Press Release 136.