Social Security Contributions and Benefits Act 1992

Part I — Contributions

Preliminary

Outline of contributory system.

1

• (1) The funds required—

• (a) for paying such benefits under this Act or any other Act as are payable out of the National Insurance Fund and not out of other public money; and

• (b) for the making of payments under section 162 of the Administration Act towards the cost of the National Health Service,

shall be provided by means of contributions payable to the Inland Revenue by earners, employers and others, together with the additions under subsection (5) below and amounts payable under section 2 of the Social Security Act 1993.

• (2) Contributions under this Part of this Act shall be of the following ... classes—

• (a) Class 1, earnings-related, payable under section 6 below, being—

• (i) primary Class 1 contributions from employed earners; and

• (ii) secondary Class 1 contributions from employers and other persons paying earnings;

• (b) Class 1A, payable under section 10 below ... by persons liable to pay secondary Class 1 contributions and certain other persons;

• (bb) Class 1B, payable under section 10A below by persons who are accountable to the Inland Revenue in respect of income tax on general earnings in accordance with a PAYE settlement agreement;

• (c) Class 2, flat-rate, payable ... under section 11 below by self-employed earners;

• (d) Class 3, payable under section 13 or 13A below by earners and others voluntarily with a view to providing entitlement to benefit, or making up entitlement;

• (da) Class 3A, payable by eligible people voluntarily under section 14A with a view to obtaining units of additional pension; and

• (e) Class 4, payable under section 15 below in respect of the profits or gains of a trade, profession or vocation, or under section 18 below in respect of equivalent earnings.

• (3) The amounts and rates of contributions in this Part of this Act and the other figures in it which affect the liability of contributors shall—

• (a) be subject to regulations under sections 19(4) and 116 to 120 below; and

• (b) to the extent provided for by Part IX of the Administration Act be subject to alteration by orders made by the Treasury from year to year under that Part,

...

• (4) Schedule 1 to this Act—

• (a) shall have effect with respect to the computation, collection and recovery of contributions of Classes 1, 1A, 1B, , 3 and 3A, and otherwise with respect to contributions of those classes; and

• (b) shall also, to the extent provided by regulations made under section 18 below, have effect with respect to the computation, collection and recovery of Class 4 contributions, and otherwise with respect to such contributions, ....

• (5) For each financial year there shall, by way of addition to contributions, be paid out of money provided by Parliament, in such manner and at such times as the Treasury may determine, amounts the total of which for any such year is equal to the aggregate of all statutory sick pay , statutory maternity pay, statutory paternity pay, statutory adoption pay , statutory shared parental pay , statutory parental bereavement pay and statutory neonatal care pay recovered by employers and others in that year, as estimated by the Government Actuary or the Deputy Government Actuary.

• (6) No person shall—

• (a) be liable to pay Class 1, Class 1A , Class 1B or Class 2 contributions unless he fulfils prescribed conditions as to residence or presence in Great Britain;

• (aa) be treated under section 11(5B) as having actually paid Class 2 contributions unless he fulfils such conditions;

• (b) be entitled to pay Class 3 contributions unless he fulfils such conditions; or

• (c) be entitled to pay Class 1, Class 1A , Class 1B or Class 2 contributions other than those which he is liable to pay, except so far as he is permitted by regulations to pay them.

• (7) Regulations under subsection (6) above shall be made by the Treasury.

Categories of earners.

2

• (1) In this Part of this Act and Parts II to V below—

• (a) “employed earner” means a person who is gainfully employed in Great Britain either under a contract of service, or in an office (including elective office) with ... earnings; and

• (b) “self-employed earner” means a person who is gainfully employed in Great Britain otherwise than in employed earner’s employment (whether or not he is also employed in such employment).

• (2) Regulations may provide—

• (a) for employment of any prescribed description to be disregarded in relation to liability for contributions otherwise arising from employment of that description;

• (b) for a person in employment of any prescribed description to be treated, for the purposes of this Act, as falling within one or other of the categories of earner defined in subsection (1) above, notwithstanding that he would not fall within that category apart from the regulations.

• (2ZA) Regulations under subsection (2)(b) may make provision treating a person (“P”) as falling within one or other of the categories of earner in relation to an employment where arrangements have been entered into the main purpose, or one of the main purposes, of which is to secure—

• (a) that P is not treated by other provision in regulations under subsection (2)(b) as falling within that category of earner in relation to the employment, or

• (b) that a person is not treated as the secondary contributor in respect of earnings paid to or for the benefit of P in respect of the employment.

• (2ZB) In subsection (2ZA) “arrangements” include any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable, and any associated operations.

• (2A) Regulations under subsection (2) above shall be made by the Treasury and, in the case of regulations under paragraph (b) of that subsection, with the concurrence of the Secretary of State.

• (3) Where a person is to be treated by reference to any employment of his as an employed earner, then he is to be so treated for all purposes of this Act; and references throughout this Act to employed earner’s employment shall be construed accordingly.

• (4) Subsections (1) to (3) above are subject to the provision made by section 95 below as to the employments which are to be treated, for the purposes of industrial injuries benefit, as employed earner’s employments.

• (5) For the purposes of this Act, a person shall be treated as a self-employed earner as respects any week during any part of which he is such an earner (without prejudice to his being also treated as an employed earner as respects that week by reference to any other employment of his).

“Earnings" and “earner".

3

• (1) In this Part of this Act and Parts II to V below—

• (a) “earnings” includes any remuneration or profit derived from an employment; and

• (b) “earner” shall be construed accordingly.

• (2) For the purposes of this Part of this Act and of Parts II to V below other than those of Schedule 8—

• (a) the amount of a person’s earnings for any period; or

• (b) the amount of his earnings to be treated as comprised in any payment made to him or for his benefit,

shall be calculated or estimated in such manner and on such basis as may be prescribed by regulations made by the Treasury with the concurrence of the Secretary of State.

• (2A) Regulations made for the purposes of subsection (2) above may provide that, where a payment is made or a benefit provided to or for the benefit of two or more earners, a proportion (determined in such manner as may be prescribed) of the amount or value of the payment or benefit shall be attributed to each earner.

• (3) Regulations made for the purposes of subsection (2) above may prescribe that payments of a particular class or description made or falling to be made to or by a person shall, to such extent as may be prescribed, be disregarded or, as the case may be, be deducted from the amount of that person’s earnings.

• (4) Subsection (5) below applies to regulations made for the purposes of subsection (2) above which make special provision with respect to the earnings periods of directors and former directors of companies.

• (5) Regulations to which this subsection applies may make provision—

• (a) for enabling companies, and directors and former directors of companies, to pay on account of any earnings-related contributions that may become payable by them such amounts as would be payable by way of such contributions if the special provision had not been made; and

• (b) for requiring any payments made in accordance with the regulations to be treated, for prescribed purposes, as if they were the contributions on account of which they were made.

Payments treated as remuneration and earnings.

4

• (1) For the purposes of section 3 above there shall be treated as remuneration derived from employed earner’s employment—

• (a) any sum paid to or for the benefit of a person in satisfaction (whether in whole or in part) of any entitlement of that person to—

• (i) statutory sick pay; or

• (ii) statutory maternity pay;

• (iii) ... statutory paternity pay;

• (iv) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (v) statutory adoption pay; ...

• (vi) statutory shared parental pay; ...

• (vii) statutory parental bereavement pay; or

• (viii) statutory neonatal care pay; and

• (b) any sickness payment made—

• (i) to or for the benefit of the employed earner; and

• (ii) in accordance with arrangements under which the person who is the secondary contributor in relation to the employment concerned has made, or remains liable to make, payments towards the provision of that sickness payment.

• (2) Where the funds for making sickness payments under arrangements of the kind mentioned in paragraph (b) of subsection (1) above are attributable in part to contributions to those funds made by the employed earner, regulations may make provision for disregarding, for the purposes of that subsection, the prescribed part of any sum paid as a result of the arrangements.

• (3) For the purposes of subsections (1) and (2) above “sickness payment” means any payment made in respect of absence from work due to incapacity for work, ....

• (4) For the purposes of section 3 above there shall be treated as remuneration derived from an employed earner’s employment—

• (a) the amount of any gain calculated under section 479 of ITEPA 2003 in respect of which an amount counts as employment income of the earner under section 476 of that Act (charge on acquisition of securities pursuant to option etc), reduced by any amounts deducted under section 480(1) to (6) of that Act in arriving at the amount counting as such employment income;

• (b) any sum paid (or treated as paid) to or for the benefit of the earner which is chargeable to tax by virtue of section 225 or 226 of ITEPA 2003 (taxation of consideration for certain restrictive undertakings).

• (5) For the purposes of section 3 above regulations may make provision for treating as remuneration derived from an employed earner’s employment any payment made by a body corporate to or for the benefit of any of its directors where that payment would, when made, not be earnings for the purposes of this Act.

• (6) Regulations may make provision for the purposes of this Part—

• (a) for treating any amount on which an employed earner is chargeable to income tax under the employment income Parts of ITEPA 2003 as remuneration derived from the earner’s employment; and

• (b) for treating any amount which in accordance with regulations under paragraph (a) above constitutes remuneration as an amount of remuneration paid, at such time as may be determined in accordance with the regulations, to or for the benefit of the earner in respect of his employment.

• (7) Regulations under this section shall be made by the Treasury with the concurrence of the Secretary of State.

Earnings of workers supplied by service companies etc.

4A

• (1) Regulations may make provision for securing that where—

• (a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),

• (b) the performance of those services by the worker is (within the meaning of the regulations) referable to arrangements involving a third person (and not referable to any contract between the client and the worker), and

• (c) the circumstances are such that, were the services to be performed by the worker under a contract between him and the client, he would be regarded for the purposes of the applicable provisions of this Act as employed in employed earner’s employment by the client,

relevant payments or benefits are, to the specified extent, to be treated for those purposes as earnings paid to the worker in respect of an employed earner’s employment of his.

• (2) For the purposes of this section—

• (a) “the intermediary” means—

• (i) where the third person mentioned in subsection (1)(b) above has such a contractual or other relationship with the worker as may be specified, that third person, or

• (ii) where that third person does not have such a relationship with the worker, any other person who has both such a relationship with the worker and such a direct or indirect contractual or other relationship with the third person as may be specified; and

• (b) a person may be the intermediary despite being—

• (i) a person with whom the worker holds any office or employment, or

• (ii) a body corporate, unincorporated body or partnership of which the worker is a member;

and subsection (1) above applies whether or not the client is a person with whom the worker holds any office or employment.

• (2A) Regulations may also make provision for securing that, where the services of an individual (“the worker”) are provided (directly or indirectly) by a managed service company (“the MSC”) relevant payments or benefits are, to the specified extent, to be treated for the purposes of the applicable provisions of this Act as earnings paid to the worker in respect of an employed earner’s employment of his.

• (2B) In subsection (2A) “managed service company” has the same meaning as it has for the purposes of Chapter 9 of Part 2 of ITEPA 2003.

• (2C) Regulations may also make provision—

• (a) for a person (“a jointly liable person”) to be jointly and severally liable for contributions payable by an umbrella company, including contributions payable as a result of provision made by virtue of paragraph (c), in respect of earnings paid to or for the benefit of an earner (“the worker”) in circumstances where the jointly liable person is jointly and severally liable for amounts in respect of the employment of the worker as a result of Chapter 11 of Part 2 of ITEPA 2003,

• (b) in connection with the recovery of those contributions from a jointly liable person, and

• (c) for securing that, where an individual is treated for income tax purposes, as a result of section 61Z1 of ITEPA 2003, as holding an employment with a purported umbrella company, within the meaning of that section—

• (i) payments or benefits of any specified description made or provided in connection with the performance by the individual of the services to which the deemed employment relates are treated for the purposes of the applicable provisions of this Act as earnings paid to the worker in respect of an employed earner’s employment,

• (ii) the individual is treated for those purposes, in relation to such payments or benefits, as employed in the employed earner’s employment by the purported umbrella company, and

• (iii) the purported umbrella company, whether or not fulfilling the conditions prescribed under section 1(6)(a) for secondary contributors, is treated for those purposes as the secondary contributor in respect of those payments or benefits.

• (3) Regulations under this section may, in particular, make provision—

• (a) for the worker to be treated for the purposes of the applicable provisions of this Act, in relation to the specified amount of relevant payments or benefits (the worker’s “attributable earnings”), as employed in employed earner’s employment by the intermediary or the MSC (as the case requires);

• (b) for the intermediary or the MSC (whether or not fulfilling the conditions prescribed under section 1(6)(a) above for secondary contributors) to be treated for those purposes as the secondary contributor in respect of the worker’s attributable earnings;

• (c) for determining—

• (i) any deductions to be made, and

• (ii) in other respects the manner and basis in and on which the amount of the worker’s attributable earnings for any specified period is to be calculated or estimated,

in connection with relevant payments or benefits;

• (d) for aggregating any such amount, for purposes relating to contributions, with other earnings of the worker during any such period;

• (e) for determining the date by which contributions payable in respect of the worker’s attributable earnings are to be paid and accounted for;

• (f) for apportioning payments or benefits of any specified description, in such manner or on such basis as may be specified, for the purpose of determining the part of any such payment or benefit which is to be treated as a relevant payment or benefit for the purposes of the regulations;

• (g) for disregarding for the purposes of the applicable provisions of this Act, in relation to relevant payments or benefits, an employed earner’s employment in which the worker is employed (whether by the intermediary, the MSC or an umbrella company or otherwise) to perform the services in question;

• (h) for otherwise securing that a double liability to pay any amount by way of a contribution of any description does not arise in relation to a particular payment or benefit or (as the case may be) a particular part of a payment or benefit;

• (i) for securing that, to the specified extent, two or more persons, whether—

• (i) connected persons (within the meaning of section 993 of the Income Tax Act 2007), or