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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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NIM12012 - Class 1: Calculating Class 1 NICs for Directors - Miscellaneous - Dividends

Section 3 SSCBA 1992 & Section 6 SSCBA 1992

Directors receive dividends as shareholders in the company and not in their capacity asdirectors. Dividends are therefore not earnings for the purposes of National InsuranceContributions. If a company pays an unlawful dividend to its directors, or any othershareholder, the money is returnable to the company (Section 277 Companies Act 1985) andis not re-classified as earnings.

If the company is possibly an intermediary within the ‘IR35’ legislation, seeESM3000 onwards.