NIM12003 – Class 1: Calculating Class 1 NICs for Directors: Definition of Director: Annual earnings period
Regulation 8 SSCR 2001
‘Director’ is further defined when deciding what
earnings period should be used for a payment of earnings.
Regulation 8 SSCR 2001 refers to “director of a
company”. “Company” is defined in Regulation 1(2)
to mean:
- a company within Section 735 Companies Act 1985, or
- a company within Section 718 Companies Act 1985
A company within Section 735 is one formed and registered under
one of the 1929, 1948 to 1983 or 1985 Companies Acts. If a company
has a company registered number, it will be within Section 735.
A company within Section 718 is not registered under Section
735 but is
- any body corporate incorporated in, and having a place of business in Great Britain, but does not include
- any body incorporated or registered under any public general Act of Parliament, or
- any body not formed for the purpose of carrying on a business with a view to gain, or
- any body exempted by direction of the Secretary of State for Employment
What this means is that a director of a company, not within
Sections 718 and 735 Companies Act 1985, does not have an annual
earnings period. Any remuneration is still liable to Class 1 NICs
because a director is an office holder and earnings periods for
such directors will be within the normal rules for employed
earners, see
NIM08000.
Examples of directors of companies or bodies corporate that
are not within Regulation 8 are:
- Building Societies, which have not de-mutualised.
- Charities, but not a trading company set up by the charity
- Non-British based foreign companies
- Building Societies are excluded from the Companies Act because of the provisions of the Building Society Acts.
- Any case should be submitted to Personal Tax Technical Longbenton where there appears to have been a deliberate attempt to circumvent the directors’ annual earnings period legislation.
It should be noted that the definition of a company for regulation 27 SSCR 2001 (certain payments to members of professional partnerships and nominee directors) is wider than that used for regulation 8 (see NIM12010).
