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HMRC internal manual

National Insurance Manual

Class 1: Calculating Class 1 NICs for Directors: Annual earnings periods: Directorship ceases and earnings paid in subsequent tax year

Regulation 8(5) SSCR 2001

The earnings period is the year in which earnings are paid if the earnings are paid ina tax year after the directorship ceased and they can be linked to any period during whichthe directorship was held. The earnings are not aggregated with any other earnings withwhich they would normally fall to be aggregated (Regulation 8(5) SSCR 2001).

For example, if an employee ceases to be a director in 2001/2002 but remains with thecompany as an employee and in July 2002 receives:

  • fees which relate to the period of the directorship in the 2001/2002 tax year and
  • his or her normal monthly salary as an employee

NICs should be calculated:

  • on the fees by reference to an annual earnings period - in this case the 2002/2003 tax year and
  • on the salary by reference to the normal monthly earnings period.

The position where a director receives earnings in respect of his directorship in a taxyear after he resign but those earnings cannot be attributable to any period is currentlyunder review. Although cases where such a period cannot be established will be rare, youshould refer any cases to Personal Tax Technical (Longbenton).