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HMRC internal manual

National Insurance Manual

NICs avoidance: employment income provided through third parties: Employer Financed Retirement Benefit Schemes - payments disregarded from earnings

Part 6 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004)

Payments made from an EFRBS, to or for the benefit of an earner, are earnings under section 3(1) of the SSCBA 1992. Some of these payments are disregarded from earnings under Part 6 of Schedule 3 to the SS(C)R 2001 (Part 6). For guidance about payments out of an EFRBS that can be disregarded, see NIM02760.

Regulation 22B of the SS(C)R 2001 cannot treat any of the amounts that are disregarded from earnings as earnings, where the payment disregarded from earnings for NICs purposes, counts as employment income under Part 7A 2003. This does not, however, prevent the amount from counting as employment income under Part 7A of ITEPA for income tax purposes.

Although an amount may be disregarded from earnings when assessing Class 1 NICs the amount is earnings. Regulation 22B of the SS(C)R 2001 only applies where the amount is not already earnings. So, if an amount is earnings but it has been disregarded, regulation 22B does not apply.

If a step is taken before the disregarded payment is made and it gives rise to an amount counting as employment income under Part 7A of ITEPA 2003, then regulation 22B of SS(C)R 2001 treats the employment income as earnings for Class 1 NICs purposes. For more guidance about steps taken relating to earnings disregarded under Part 6, see NIM52950.