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HMRC internal manual

National Insurance Manual

NICs avoidance: employment income provided through third parties: 2019 loan charge

Schedule 11 to Finance (No 2) Act 2017

Regulation 22B Social Security (Contributions) Regulations 2001

Schedule 3 Paragraph 9 Social Security (Categorisation of Earners) Regulations) 1978

Part 7A Income Tax (Earnings and Pensions) Act 2003 (ITEPA) was introduced in April 2011.  It charges tax on employment income which has been routed through third parties where certain conditions are met. A corresponding NICs provision was also introduced via Regulation 22B of the Social Security Contributions Regulations 2001 in December 2011, making anything treated as employment income by virtue of Chapter 2 of Part 7A of ITEPA, earnings for NICs purposes.  The income tax charge applied to transactions entered into from 9 December 2010 and the NICs provision came into effect on 6 December 2011.  For further information, see NIM52000

Schedule 11 Finance (No 2) Act 2017 introduced further provisions to charge to income tax any remuneration which had been routed through a third party in the form of loans which had been made from 6 April 1999. Where a balance of such a loan is still outstanding at the end of 5 April 2019, the 2017 provisions count the amount of the outstanding balance as the employment income of the recipient of the loan in tax year 2018/19. Regulation 22B of the SSCR will also treat the amount treated as employment income as earnings for NICs purposes. This provision is referred to as the 2019 loan charge. 

Application of Schedule 11 Finance (No 2) Act 2017 and Regulation 22B of the Social Security (Contributions) Regulations 2001

For detailed guidance on when the 2019 loan charge arises go to EIM47000.

When the 2019 loan charge arises, a Class 1 NICs liability arises by virtue of Regulation 22B of the Social Security (Contributions) Regulations 2001. 

Employer no longer exists

If at the time the loan charge arises the employer who originally routed the employment income through the third party no longer exists, the employee is liable to pay over the income tax charge on the loan to HMRC. However, there is no such corresponding liability for the employee to pay over the NICs to HMRC. 

Employer is offshore – application of Schedule 3, Paragraph 9 to the Social Security (Categorisation of Earners) Regulations 1978 (as amended)

Schedule 3, Paragraph 9 to the Social Security (Categorisation of Earners) Regulations 1978 (as amended) treats certain persons as secondary contributors for National Insurance purposes. Regulation 22B(3A) of the SSCR ensures that those persons treated as secondary contributors by virtue of Schedule 3, Paragraph 9, are not liable to pay NICs on the 2019 loan charge.