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HMRC internal manual

National Insurance Manual

Class NICs: Share and share options acquired before 6 April 1999: Own-company shares acquired 7 November 1991 to 5 April 1999

Social Security (Contributions) Regulations 1979

Social Security (Contributions) Amendment (No.6) Regulations 1991

  • Between 7 November 1991 and 4 December 1996 a payment by way of own-company shares was disregarded in the calculation of earnings if the employer provided the employee with shares in the employer company; or
  • a company that had control of the employer company; or
  • a company which had, or had control of, a body corporate that was a -
  • (i) member of a consortium owning that employer company; or
  • (ii) body corporate having control of that employer company.

Social Security (Contributions)(Amendment No.6) Regulations 1996

Between 5 December 1996 and 30 September 1998 a Class 1 NICs liability arose when an employer conferred the beneficial interest in a share option to an employee and the underlying shares or the option itself:

  • were not in an approved scheme; but
  • were capable of being sold on a recognised investment exchange; or
  • trading arrangements existed.

Trading arrangements are defined as ‘’arrangements for the purposes of enabling the person to whom the asset is provided to obtain an amount similar to the expense incurred in the provision of the asset’’. The amount of earnings is the amount obtainable under the trading arrangements.

Social Security (Contributions) Amendment (No.3) Regulations 1998

Between 1 October 1998 and 5 April 1999 a Class 1 NICs liability arose at the time an employer conferred to an employee the beneficial interest in own-company shares provided the shares or option itself were:

  • readily convertible assets - see NIM06865: or
  • the shares were not provided through an approved scheme.

The amount of earnings liable for Class 1 NICs was the best estimate of the amount likely to be chargeable to income tax under Schedule E.