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HMRC internal manual

National Insurance Manual

NICs avoidance: employment income provided through third parties: securities - general

Some arrangements seeking to avoid NICs liability have involved the provision of gains arising from securities (including shares) and/or options over securities.

Employment related securities are taxed under Part 7 of ITEPA 2003 ‘Income and exemptions relating to securities’ and corresponding NICs legislation, see NIM06800 and Employment Related Securities Manual.

When looking at arrangements involving the provision of gains arising from securities and/ or options over securities, consider the application of Parts 7 and 7A of ITEPA 2003 and equivalent NICs legislation.

Certain sections of ITEPA 2003 exclude Part 7A from applying so the value of a relevant step does not count as employment income.

  • Section 554E - provides exclusions relating to the four tax/NICs advantaged share and share option schemes, see EIM45315 and EIM45320.
  • Section 554J - provides an exclusion for employee share schemes which have a specified vesting date, see from EIM45355.
  • Section 554K - provides an exclusion for employee share schemes which have specified exit events, see from EIM45385.
  • Section 554L - provides an exclusion for employee share option schemes which have a specified vesting date, see from EIM45405.
  • Section 554M - provides an exclusion for employee share option schemes which have specified exit events, see from EIM45435.
  • Section 554N - in certain circumstances, section 554N gives Part 7 ITEPA 2003 (employment-related securities) priority over the Part 7A rules. This overrides the general rule that Part 7A takes priority, see from EIM45325.

If any of these sections apply there will be no amount treated as earnings for Class 1 NICs purposes under regulation 22B of the SS(C)R 2001, see NIM52100. But this does not rule out the possibility that there may be a payment of earnings or an amount treated as earnings under another provision within NICs legislation. See the example at NIM53550.