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HMRC internal manual

Employment Related Securities Manual

PAYE & NICs: NICs elections & agreements

From 28 July 2000 there is a facility whereby

  • the employer and employee can agree or jointly elect for the employee to meet the employer’s liability to pay secondary NICs on share option gains, and
  • the employee can get a deduction equal to the amount of NICs transferred (as elected) when working out the amount chargeable to income tax. A deduction is not allowed when working out the charge to NICs.

This provision was extended on 1 September 2004 to cover post-acquisition charges on restricted securities (Chapter 2 Part 7 ITEPA 2003) and convertible securities (Chapter 3 Part 7 ITEPA 2003).


The legislation is set out in

  • ITEPA03/S481 for securities options
  • ITEPA03/S428A for restricted securities
  • ITEPA03/S442A for convertible securities
  • SSCBA92/SCH1 para 3A for agreements
  • SSCBA92/SCH1 para 3B for elections

Model NICs Joint Elections

The model joint election formats currently available have been revised to take into account recent changes to legislation. They are provided to help employers and practitioners who wish to submit a joint election for HMRC approval.

There are two formats:

  • a single NICs joint election
  • a two-part NICs joint election, which allows the employer to sign only one document to apply to all employees entering into the election, instead of one document for each employee. In the case of the two-part, an election will not be valid until both parts A and B are signed and dated.

The models produced here show the minimum requirements that we would expect a Joint Election to contain in order for it to be in a form ready for approval. If it is decided to use either format the employer must seek approval from HMRC before asking any employee to enter into the joint election.

Once HMRC does give its approval, it will then be left to the employer and employee to choose when to use the Joint Election but it will only become effective once it is eventually signed and dated by both the employee and the secondary contributor.

Where a joint election has been submitted that exactly matches the model as published on our web site, we will aim to grant approval within 14 days of its receipt, providing all the necessary information and documents have been submitted at the same time as the joint election application.

If the model has been used as a basis to prepare an alternative format, including alterations or additions, then we will need to examine the election format in more detail before approval can be granted. This process does take longer but we will endeavour to provide an acknowledgement within 28 days of an application being received. By this we mean that we will examine the joint election and supporting documents and either grant approval or issue a reply stating what changes or further supporting information is needed within 28 days of the application being received.

Guidance notes are set out in ERSM170760.