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HMRC internal manual

National Insurance Manual

Class 1 NICs: Securities: Payments disregarded in the calculation of earnings

Part 9 of Schedule 3 to the Social Security (Contributions) Regulations 2001

When determining whether any NICs liability arises in respect of employment-related securities, certain payments can be disregarded in the calculation of earnings. These are:

  • a payment by way of a right to acquire securities;
  • a payment by way of an allocation of shares in priority to members of the public in respect of which no liability to income tax arises by virtue of section 542 of ITEPA 2003;
  • a payment that is deducted from the earnings of the employment under a partnership share agreement;
  • a payment by way of the award of shares under a share incentive plan within the meaning of Schedule 2 to ITEPA 2003;
  • a payment by way of the acquisition of securities, interests in securities or securities options in connection with an employed earner’s employment if, or to the extent that, what is acquired is not a readily convertible asset;
  • a payment by way of the acquisition of restricted securities, or restricted interest in securities, where those securities, or that interest is, employment-related, if no charge to income tax arises under section 425 of ITEPA 2003 other than by virtue of subsection (2) of that section.

Part 9 also contains disregard provisions that apply to share options granted before 6 April 1999 but exercised on or after that date - see NIM06860.