NIM02300 - Class 1 NICs: Earnings of employees and office holders: Horse racing - prize money

In September 1992, a decision made by the Secretary of State for Social Security (responsible for decisions on matters relating to NICs prior to 6 April 1999) confirmed that prize money from the Jockey Club was paid on a voluntary basis. This means that such payments are gratuities and may be excluded from gross pay, by virtue of regulation 25 and paragraph 5 of Part 10 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004), when calculating Class 1 NICs. This is only appropriate where the payment is not

• made directly or indirectly by the secondary contributor and the sum does not comprise or represent sums previously paid to the secondary contributor; or
• directly or indirectly allocated by the secondary contributor to the earner.

For more guidance about when payments of gratuities can be disregarded from earnings when calculating Class 1 NICs liability see NIM02900.

More recently the Jockey Club has returned to its original role as a members club. The distribution of prize money to stables is now the responsibility of the British Horseracing Authority (BHA). Their rules are quite specific on the distribution of such monies and follow exactly the previous rules in being.

Effectively the stable employees decide the distribution criteria (BHA rule 119) and in line with ‘tronc’ arrangements, income tax but not NIC is accounted for by the Trainer on such distributions.