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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
, see all updates

Class 1 NICs : Earnings of employees and office holders : Funded Unapproved Retirement Benefit Schemes (FURBS) up to 5th April 2006: Payments made by an employer into a scheme on or after 6 April 1998: Separate trust funds for each employee

Payments in

An employer’s contribution (or a contribution made by a third party) to theseparate trust set up for each employee’s FURBS is earnings for NICs purposes becauseit is “remuneration or profit derived from an employment” within the meaning ofsection 3(1) of the Social Security Contributions and Benefits Act 1992. There is aliability for NICs on the payment because it is “paid to or for the benefit of anearner” as required by section 6(1) of that Act. See NIM02010and NIM02015 for guidance on the meaning of sections 3(1) and6(1).

Payments out

Payments out of FURBS will only be liable for NICs if they are derived from employmentand are not otherwise excluded from liability. Most payments out of FURBS are, however,capable of being excluded from NICs by virtue of paragraph 1 of Part VI of Schedule 3 tothe Social Security (Contributions) Regulations 2001 because they can be accepted aspayment of a pension. Payment by way of a pension can include a pension commuted to a lumpsum and this is the usual form of payment out of a FURBS.


  • NIM02159 for guidance regarding the position where there is one trust covering a number of employees and each has a distinct and separate share of the fund; and
  • NIM02160 where there is one trust covering a number of employees and the trust is set up as a discretionary benefit trust.

For details of the Class NICs position on payments made from 6th April 2006:

  • into an employer-financed retirement benefits scheme (“EFRBS”), see NIM02755 (overview) and NIM02757; and
  • out of an EFRBS, see NIM02760 (contents).