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HMRC internal manual

National Insurance Manual

Class NICs: International - Securities options

Option granted whilst in the UK

When an employee exercises an option to acquire employment-related securities, such as shares, a charge to UK income tax arises on an amount treated as employment income. The same amount treated as employment income is also treated as earnings liable for Class 1 NICs - see NIM06825. The amount of tax chargeable may be subject to a Double Taxation Agreement although these agreements do not have any application for NICs. However, there are Social Security rules that apply to people coming to work in the UK or going abroad to work which can have an impact on the NICs treatment.

UK NICs liability can be affected by:

  • European Union legislation - see NIM06852: or
  • Reciprocal Agreements/Double Contributions Conventions - see NIM06853 

Share gains may be time-apportioned for tax purposes but this does not apply to NICs. There are no provisions within NI legislation which allow for the apportionment of such gains. Section 4(4)(a) of the Social Security Contributions and Benefits Act 1992 serves to treat as remuneration derived from UK employment the full amount treated as employment income for tax purposes.

Option granted whilst outside the UK

When a share option is granted to an individual who:

  • is outside the UK; and
  • is not contributing to the UK Social Security scheme; and
  • the grant of the option is not in prospect of taking up UK employment or otherwise in respect of duties performed in the UK; but
  • is in the UK when the shares are acquired

no liability for UK NICs arises.