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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 1 NICs: Employment - Related Securities: Shares - Employee pays secondary Class 1 NICs

Paragraphs 3A and 3B to Schedule 1 of the Social Security Contributions and Benefits Act 1992 - effective from 28 July 2000

Employers and employees can arrange their National Insurance affairs so that an employee pays all, or some, of the secondary Class 1 NICs liability arising on gains deriving:

  • from a share option where the option is granted on or after 20 May 2000;
  • from a securities option where the option is granted on or after 1 September 2003;
  • since 1 September 2004, in respect of gains deriving from restricted or convertible securities.

They can do this by:

  • agreeing that the employee will meet all, or some of, the secondary Class 1 NICs liability; or
  • making a joint election to legally transfer all or some of the secondary Class 1 NICs liability to the employee.

An agreement or election can also apply to:

  • gains from securities options (including EMI options where there is a disqualifying event)
  • gains from the early exercise over shares granted under a CSOP
  • all cash cancellation payments made to an employee to give up a securities option or restricted and convertible securities
  • post-acquisition chargeable events applying to awards of restrictive securities
  • post-acquisition chargeable events applying to awards of convertible securities.

NIM06813 explains more about these provisions.