NIM02400 - Class 1 NICs: Earnings of employees and office holders: Training and similar costs: Working Neighbourhoods Pilot

Regulation 25 and paragraph 10 of Part VII of Schedule 3 to the Social Security(Contributions) Regulations 2001

The Working Neighbourhoods scheme commenced in pilot areas in April 2004. The scheme was funded through Government to local authorities selected because of socia-economic factors. There is no evidence beyond 2011 of the scheme operating as it was targeted and funded via the pilot to the years 2009, 2010 and 2011, respectively.

The scheme was funded to help people not actively looking for work find work and to keep it.

There were 2 types of payment available to participants in the scheme:

  • payments out of a Flexible Discretionary Fund. These payments were made to participants in the scheme by their Jobcentre Plus advisers. The payments being made were entirely flexible so as to meet the particular needs of the participant and remove whatever obstacle they faced in securing work or remaining in work.
  • retention payments to participants who moved into work. Participants who found work would be paid a lump sum after 13 weeks of employment and after 26 weeks of employment to encourage them to remain in work.

Payments out of the Flexible Discretionary Fund were unlikely to be liable for Class 1 NICs because of not being “earnings”. That was because the payments did not derive from employment and paid when the participants in the scheme were not in gainful employment. But payments made to reward participants in the scheme for remaining in work were classed as “earnings”. See NIM02010 for general guidance on what constitutes “earnings” for NICs purposes.

In view of the fact that at least some of the payments made under the Working Neighbourhoods pilot scheme were capable of attracting a liability for NICs, legislation was introduced with effect from 6 April 2004 to exclude them from liability. The legislation can be found at paragraph 10 of Part VII of Schedule 3 to the Social Security (Contributions) Regulations 2001. There was therefore no liability for Class 1 NICs on any payment made under the Working Neighbourhoods pilot scheme.