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HMRC internal manual

National Insurance Manual

Class1: Calculating Class1 NICs for Directors: Annual earnings periods: Examples: Fees voted

Regulation 8 SSCR 2001

Company accounts year-end is 30 June 2000. Director does not receive salary but isvoted £36000 fees at AGM held on 20 September 2000. The NICs amounts are also roundeddown for ease of presentation.

Date Cumulative Primary Secondary Notes
April to August Nil Nil Nil No earnings paid
20 September £36000 £2386 (27820 - 3952 @ 10%) 3857 (36000 - 4385 @ 12.2%) Earnings above earnings thresholds but primary NICs restricted to earnings up to UEL*
October to March £36000 £2386 £3857 No further earnings

The question to ask in this example is “How does director pay for his or herliving expenses in period before earnings voted?” The fees voted and paid in theprevious year might have been withdrawn at regular intervals from the personal bankaccount. There might be another source of income and/or there could be drawings from aloan account with the company. If the loan account is used, there could be payments inadvance of earnings within regulation 22 SSCR 2001, see NIM12014.If it is not apparent how the director can fund his or her lifestyle before the voting ofremuneration, you should inform the Inspector of Taxes who deals with the companyaccounts.

  • The above example is for a tax year prior to 6 4 2003. From 6 4 2003, a new primaryliability was introduced on all earnings above the Upper Earnings Limit. This should betaken into account when applying the example to tax years 2003/2004 onwards. Full guidanceon the new primary liability on earnings above the Upper Earnings Limit is provided at NIM01100.