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HMRC internal manual

National Insurance Manual

Class 1 NICs : Earnings of employees and office holders : Payments which are deemed to be earnings

Section 4 of the Social Security Contributions and Benefits Act 1992 expands the scope of “earnings” for the purposes of NICs by directing that certain payments are to be treated as earnings.

This provision draws into Class 1 NICs sums which would not otherwise attract a liability because they are not essentially earnings.

The payments which are treated as “remuneration derived from employed earner’s employment” by virtue of section 4, and regulations made under it, are:

  • any sums paid in respect of entitlement to Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption Pay (see NIM02355)
  • any sickness payment which results from arrangements and payments made by the secondary contributor (see NIM02345)
  • the amount of any gain calculated under section 479 of ITEPA 2003 in respect of an amount which counts as employment income under section 476 of that Act. The amount is reduced by any amount deducted under section 480(1) to (6) of ITEPA 2003. (see NIM06800 onwards )
  • any sum paid in connection with an agreement by an earner to restrict his conduct or activities in some way (that is, a payment made under a restrictive covenant) (see NIM02320. See also NIM02015 regarding the decision in the case of RCI Europe v Woods.)
  • any payment made by a company to or for the benefit of any of its directors which would not be earnings when the payment is made and the payment is made as an advance on a sum which would be earnings (for example, a payment made in advance of fees being voted) (see NIM12014)
  • amounts which are chargeable to income tax under the employment income Parts of ITEPA 2003, if they are treated as remuneration derived from employed earners employment by regulation.