NIM21019 - Class 2 National Insurance Contributions: Small Earnings Exception: Special Groups: Sub-Postmasters & others who include Class 1 earnings in the trade receipts of their business

Regulation 45(2)(b) of the Social Security (Contributions) Regulations (SSCR) 2001 (SI 2001 No. 1004)

Schedules D and E of The Income Tax and Corporation Tax Act (ICTA) 1998

The Income Tax (Trading and Other Income) Act (ITTOIA) 2005

The Income Tax (Earnings and Pensions) Act (ITEPA) 2003

Many sub-postmasters supplemented their Post Office salary by operating a general trade in the same premises. They may have paid their Post Office salary into their business account. This was in order to benefit from special tax arrangements which allow more favourable treatment of expenses where the salary was taxed under schedule D rather than schedule E (Schedule D was replaced by ITTOIA 2005. Schedule E was replaced by ITEPA 2003). For further details see ESM4400.

Before 6 July 1994 sub-postmasters whose profits from their retail sales were below the Small Earnings Exception (SEE) limit for Class 2 National Insurance contributions (NICs) were adversely affected by this practice as the inclusion of their earnings from the Post Office in their business accounts invariably took them over the SEE limit. This meant that income already subjected to Class 1 NICs also denied entitlement to exception from Class 2 liability.

From 6 July 1994, earnings from employment as an employed earner which were shown in the accounts of the business as a receipt of that business were disregarded for the purposes of establishing entitlement to SEE.

Regulation 45 of SSCR 2001 was revoked from 6 April 2015.