The National Insurance Contributions and Statutory Payments Bill published
on the United
Kingdom Parliament web (Opens new window) site was introduced into the
House of Commons on 27 November 2003. The Bill completed its Commons stages
without amendment on 28 January 2004, and had its First Reading in the House
of Lords on 29 January 2004.
The Bill and other supporting documents were published on 27 November 2003.
All related Revenue documents can be accessed from this page. The Explanatory
Notes accompanying the Bill have been revised to add clarity. For example,
we have now defined the terms 'securities' and 'artificially depressed market
value'. They will be re-published on the United Kingdom Parliament web site.
You can see the revised version by following the link below. A few very minor
changes have also been made to the Regulatory Impact Assessment. We have not
re-published this because the changes are so minor. Should anyone wish to
see a copy of the revised version please contact the Bill Team on 020 7438
9153.
Some of the documents are in Portable Document Format (PDF). To view these
documents you will need to have Adobe Acrobat Reader installed on your PC.
Contents
Explanatory Notes
Letters from Ministers
News Releases
Regulatory Impact Assessment (PDF 616K)
Draft regulations (PDF 128K)
FAQ
Explanatory Notes on the United
Kingdom Parliament web site (Opens new window).
These notes help to explain what is the intention of the clauses in the NICs
and SP Bill
Regulatory impact Assessment and draft regulations The Paymaster General to Norman Lamb MP (PDF 798K) 11 February 2004
Release dated 27 November 2003
Frequently Asked Questions
General
Share schemes
Q Does the Bill increase NICs charges?
A No, the Bill makes useful changes to the administration of National Insurance
and statutory payments to reduce technical differences between them and the
administration of tax. It makes no changes to the rates or structure of NICs.
Q When will the Bill receive Royal Assent?
A The NICs Bill is subject to Parliamentary process and it will receive Royal
Assent on completion of that process. We can confirm the Bill was introduced
into the House of Commons on the 27 November and we will update this website
as the Bill progresses through Parliament.
Q When will the supporting draft Regulations be published?
A Draft regulations are available here. The final version of the regulations
will be published after Royal Assent on the HMSO
internet site (Opens new window) as usual.
Q What does Clause 1 and 2 do?
A Clauses 1 and 2 extend employers' ability to recover Class 1 primary National
Insurance Contributions (NICs) paid on behalf of their employees and ex-employees
on securities based earnings. They allow the employer, with the agreement
of the employee, to withhold an amount of securities equal to the value of
the employees NICs paid on their behalf.
The employer can recover by this method in the year that the gain arises for
current employees, in the year of cessation and the year following cessation
for ex-employees. These changes will be made by amending both primary and
secondary legislation. Regulations will be introduced to specify how the agreements
can be entered into and the types of earnings that can be included.
Q Can I ask employees to enter into these agreements now?
A No. Currently these agreements can only be made with employees in the year
that they cease working for you. For employees who receive the gain before
cessation (but in the year of cessation) these agreements are limited to situations
when the NICs cannot be recovered from cash earnings.
Q Once the bill becomes an act can I ask employees to enter into
these agreements?
A You will be able to enter into these agreements once the bill receives Royal
Assent, and the Clauses are given effect by a treasury commencement order
and the necessary supporting Regulations are in force. These will be laid
before Parliament following Royal Assent. The Clauses are currently drafted
to allow employers to enter into agreements with their employees any time
up to the day that the security based remuneration is paid.
Q Can I ask my employees to enter into the new Joint NIC Agreements
and Elections now?
A No. Currently there is no statutory provision to allow employers and employees
to either make the new Agreements or Elections for restricted and convertible
securities. However, you can make Agreements and Elections for employment
related securities options (previously just share options), including Long
Term Incentive Plans. For further information see Transferring Employers (secondary)
National Insurance contributions (NICs) to Employees - Agreements and Joint
NICs Elections.
Q Once the Bill becomes an Act can I ask my employees to enter into
the new Joint NIC Agreements and Elections for securities already awarded?
A Yes, after the Bill receives Royal Assent, and the Clauses are given effect
by a Treasury commencement order and the necessary supporting Regulations
are in force. The Clauses as currently drafted will allow employers and employees
to jointly make Elections and Agreements for restricted or convertible securities
already awarded. However, the terms of the Elections and Agreements cannot
be applied to any employment income that has already arisen from those securities
and treated as earnings before the Election or Agreement is made.
Q Will the employees who agree to pay the employers NIC liability,
either through an Agreement or an Election, obtain Income Tax relief?
A Yes, we propose to include a measure in the Finance Bill 2004 for employees
who bear the employer's NIC liability, either under an Agreement or an Election,
to get Income Tax relief for the amount of employer's secondary NIC paid by
them. The provisions are likely to operate in the same way as the Income Tax
relief currently provided for the employee's payment of secondary NIC on gains
from securities options.
Q Will the Inland Revenue provide model Joint NIC elections and guidance
on their website?
A Yes. We will provide model Joint NIC Elections and guidance on the website.
As most of the requirements for the new Elections are similar to the Elections
for securities options, the existing models will be amended to cater for applications
to restricted and convertible securities.
Q As an employing company I can get Corporation Tax relief for the
restricted and convertible securities acquired by my employees. Will that
relief be affected if they agree to pay the secondary employers NIC liability
on these securities?
A Along with a proposal to provide for Income Tax relief, we propose to make
a consequential amendment to Schedule 23 Finance Act 2003. This is to ensure
the Corporation Tax relief for employee share acquisition is available as
originally provided and will not be affected by the employee getting income
tax relief for those securities.
Q Can an Election or Agreement be entered into where the employment
income would be charged to income tax under Chapters 3A or 3B?
A Chapters 3A and 3B in Part 7 of ITEPA are anti-avoidance provisions and,
therefore, the proposed extension of the NIC Agreements and Elections to employment
related securities will not be applicable to employment income that arises
by virtue of those chapters.
