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HMRC internal manual

National Insurance Manual

NICs avoidance: employment income provided through third parties: NICs regulations

Social Security (Contributions) (Amendment No 5) Regulations 2011 (SI 2011 No 2700)

Regulation 22B and paragraph 2A of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004)

The amendment regulations amended the SS(C)R 2001 to provide legislation that

  • treats the amount of employment income determined under Part 7A of ITEPA 2003 as earnings for NICs if not already earnings, see NIM52100 
  • prevents the double charging of Class 1 NICs on payments of earnings which have previously been included as such when assessing Class 1 NICs, see NIM52600.

These regulations took effect from 6 December 2011, after Part 7A of ITEPA 2003 had taken effect. The regulations only apply to amounts that count as employment income on or after that date. The NICs legislation does not have retrospective effect.

The income tax rules have effect in relation to relevant steps taken on or after 6 April 2011. For income tax purposes, anti-forestalling rules cover relevant steps taken in the period from 9 December 2010 to 5 April 2011, see from EIM45905.

Relevant steps taken before 6 December 2011 (including those taken before 6 April 2011) will not give rise to NICs liability. However, it must not be forgotten that normal NICs liability rules must still be considered in respect of these steps. Payments may be earnings under section 3(1)(a) SSCBA 1992, see NIM02010. So there may be Class 1 NICs liability, or, if what is provided is a payment disregarded from earnings, Class 1A NICs may be due, see NIM13021.

For guidance about the introduction of Part 7A of ITEPA 2003, see NIM52001 and EIM45000.