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HMRC internal manual

National Insurance Manual

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:

Single trust fund covering a number of employees - employees having distinct and separate shares in the fund

Payments in

An employer’s contribution (or a contribution made by a third party) to the trust for each employee is earnings for NICs purposes because it is “remuneration or profit derived from an employment” within the meaning of section 3(1) of the Social Security Contributions and Benefits Act 1992. There is a liability for NICs on the payment because it is “paid to or for the benefit of an earner” as required by section 6(1) of that Act. See NIM02010 and NIM02015 for guidance on the meaning of sections 3(1) and 6(1).

Payments out

Payments out of FURBS will only be liable for NICs if they are derived from employment and 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 to the Social Security (Contributions) Regulations 2001 because they can be accepted as payment of a pension. Payment by way of a pension can include a pension commuted to a lump-sum, and this is the usual form of payment out of a FURBS.

See also NIM02158 for guidance where there is a separate trust for each employee, 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).