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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class NICs: Share and share options acquired before 6 April 1999: Non own-company shares acquired 7 November 1991 to 5 April 1999

Regulation 17(4) of the Social Security (Contributions) Regulations 1975

Payments by way of shares and share options are ‘payments in kind’ and were disregarded in the calculation of earnings by the above provision. The disregard was carried forward into regulation19(1)(d) of the Social Security (Contributions) Regulations 1979.

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Social Security (Contributions) Regulations 1979

Schedule 1A

There was some concern about the abuse of the disregard following the abolition of the Upper Earnings Limit for secondary contributions in October 1985. Schedule 1A was therefore introduced, with effect from 7 November 1991, by the Social Security (Contributions)(Amendment)(No.6) Regulations 1991. Part I of Schedule 1A served to exclude shares and share options, except shares in an approved scheme and own-company shares, from being disregarded as a payment in kind. Regulation 18(2) explained that the amount of earnings was the amount that the beneficial interest might reasonably be expected to fetch if sold on the open market on the day it was conferred.

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Social Security (Contributions)(Amendment)(No.4) Regulations 1995

Schedule 1A was amended, with effect from 6 April 1995, with the insertion of paragraph 9C. This paragraph excludes assets which were capable of being sold on a recognised investment exchange or where trading arrangements existed from being disregarded in the calculation of earnings. Paragraph 19 to Schedule 1A defined trading arrangements as having the meaning assigned to it in section 203K(2) of the Income and Corporation Taxes Act 1988. Regulation 18(9) explained that the amount of earnings was calculated by reference to the amount obtainable under the trading arrangements in question.

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

The above provisions introduced, with effect from 5 December 1996, regulations 18 and 19. Regulation 19(1) provided that only own-company shares acquired under an approved scheme or non-tradeable shares were disregarded in the calculation of earnings. Similarly, regulation 19(1)(m) provided that only options acquired from an approved scheme or options over non-tradeable shares were disregarded in the calculation of earnings. Regulation 18 was also amended to reflect how earnings were calculated.