Legalize / United Kingdom / Statutory-Instrument

The Social Security (Contributions) Regulations 2001

Type Statutory-Instrument

Publication 2001-03-15

Last updated 2026-04-06

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

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Convertible interest in shares

8

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Assignment or release of right to acquire shares where neither right nor shares readily convertible

9

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Assignment or release of a right, acquired as director or employee before 6th April 1999, to acquire shares where neither right nor shares readily convertible

10

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercise of right to acquire shares gained as director or employee before 6th April 1999

11

(1) This paragraph applies if—

(a) an earner obtained, before 6th April 1999, a right to acquire shares in a body corporate;

(b) the earner subsequently obtained a replacement right (within the meaning given in paragraph 16A(3) of Part 9 of Schedule 3);

(d) paragraph 11A of this Schedule does not apply; and

(e) paragraph 16A of Part 9 of Schedule 3 does not apply because sub-paragraph (4) of that paragraph is not satisfied.

(2) If this paragraph applies, the amount of earnings comprised in any payment realised by the exercise of the replacement right shall be calculated or estimated in accordance with sub-paragraph (3).

(3) The basis for calculating the amount of a gain realised by the exercise of the replacement right shall be the best estimate that can reasonably be made of the amount found as follows.

Interpretation of paragraphs 9, 10 and 11

12

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Apportionment of a payment from a retirement benefits scheme for the benefit of two or more people

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation of non-cash vouchers

14

(1) The amount of earnings comprised in any payment by way of a non-cash voucher which is not otherwise disregarded by these Regulations and which falls to be taken into account in calculating an employed earner’s earnings shall be calculated on the basis set out in sub-paragraph (2).

(1A) This paragraph is subject to paragraph 14A (valuation of non-cash vouchers provided under optional remuneration arrangements).

(2) The basis referred to in sub-paragraph (1) is that of an amount equal to the expense incurred (“the chargeable expense”)—

(a) by the person at whose cost the voucher and the money, goods or services, for which it is capable or being exchanged, are provided;

(b) in, or in connection with that provision,

and any money, goods or services obtained by the employed earner or any other person in exchange for the voucher shall be disregarded.

(3) For the purposes of sub-paragraph (2) the chargeable expense shall be reduced by any part of that which the employed earner makes good to the person incurring it.

(4) The valuation of qualifying childcare vouchers is determined in accordance with paragraph 7 of Part 5 of Schedule 3.

Apportionment of earnings comprised in a cash or non-cash voucher provided for benefit of two or more employed earners

15

(1) The amount of earnings comprised in any payment by way of a cash voucher or a non-cash voucher provided for the benefit of two or more employed earners and which falls to be taken into account in computing the earnings of each of those earners shall be calculated or estimated on the basis set out in whichever of sub-paragraphs (2) or (3) applies.

(2) If the respective proportion of the benefit of the voucher to which each of those earners is entitled is know at the time of the payment, the basis is that of a separate payment equal to that proportion.

(3) In any case where the respective proportions are not know at the time of the payment, the basis is equal apportionment between all those earners.

(4) In this paragraph—

(a) “chargeable expense” has the same meaning, and is calculated in the same way, as in paragraph 14; and

(b) if an employed earner makes good any part of the chargeable expense to the person incurring it, that chargeable expense in relation to that employed earner shall be reduced by that part.

PART I — INTRODUCTORY

Introduction

1

(1) This Schedule contains provisions about payments which are to be disregarded in the calculation of earnings for the purposes of earnings-related contributions.

(2) Part II contains provisions about the treatment of payments in kind.

(3) Part III and IV specifies payments by way of assets which are not to be disregarded by virtue of paragraph 1 of Part II.

(4) Part V specifies non-cash vouchers which are to be disregarded by virtue of paragraph 1 of Part II.

(5) In computing earnings there are also to be disregarded—

(a) the pensions and pension contributions specified in Part VI;

(b) the payments in respect of training and similar courses specified in Part VII;

(d) the incentives by way of securities specified in Part IX; and

(e) the miscellaneous payments specified in Part X.

Interpretation

2

(1) In this Schedule, unless the context otherwise requires—

(a) a reference to a numbered Part is a reference to the Part of this Schedule which bears that number;

(b) a reference in a Part, to a numbered paragraph is a reference to the paragraph of that Part which bears that number; and.

(c) a reference in a paragraph to a lettered or numbered sub-paragraph is a reference to the sub-paragraph of that paragraph which bears that letter or number.

PART II — PAYMENTS IN KIND

Certain payments in kind to be disregarded

1

A payment in kind, or by way of the provision of services, board and lodging or other facilities is to be disregarded in the calculation of earnings.

Payments by way of assets not to be disregarded

2

Payments falling within paragraph 1 do not include any payment by way of—

(a) the conferment of any beneficial interest in—

(i) any asset mentioned in Part III or Part IV,

(ii) any contract of long-term insurance which falls within paragraph I, III or VI of Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

(b) a non-cash voucher not of a description mentioned in Part V or to which paragraph 4 of Part X applies.

(2) Sub-paragraph (1)(a)(i) is subject to the qualification that an asset, which falls within either Part III or Part IV, shall nevertherless be disregarded under paragraph 1 if no liability to income tax arises by virtue of section 323 of ITEPA 2003 (long service awards).

(3) For the purposes of sub-paragraph (1)(a)(ii), if the contract—

(a) falls within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and Part I of that Schedule; or

(b) is treated for the purposes of that Order as falling within Part II of that Schedule by Article 3(3) of that Order,

that contract shall be treated as a contract of long-term insurance.

PART III — PAYMENTS BY WAY OF READILY CONVERTIBLE ASSETS NOT DISREGARDED AS PAYMENTS IN KIND

1

A readily convertible asset within the meaning of section 702 of ITEPA 2003.

2

An asset which, in accordance with section 697 of ITEPA 2003 (PAYE: enhancing the value of an asset), would be treated, for the purposes of section 696 of that Act, as a readily convertible asset.

3

Any voucher, stamp or similar document—

(a) whether used singularly or together with other such vouchers, stamps or documents; and

(b) which is capable of being exchanged for an asset falling within paragraph 1 or 2.

PART IV — PAYMENTS BY WAY OF SPECIFIC ASSETS NOT DISREGARDED AS PAYMENTS IN KIND

Shares and stock

1

Securities.

Certain debentures and other securities for loans

2

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Loans stocks of public and local authorities

3

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Warrants etc for loan stock and debentures

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Units in collective investment schemes

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options to acquire assets, currency, precious metals or other options

6

Options to acquire, or dispose of—

(a) currency of the United Kingdom or any other country or territory;

(b) gold, silver, palladium or platinum;

(d) an option to acquire, or dispose of, an asset falling within sub-paragraph (a), (b) or (c).

Contracts for futures

7

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Contracts for differences or to secure profit by reference to movements of indices

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alcoholic liquor on which duty has not been paid

9

Any alcoholic liquor, within the meaning of section 1 of the Alcoholic Liquor Duties Act 1979 in respect of which no duty has been paid under that Act.

Gemstones

10

Any gemstone, including stones such as diamond, emerald, ruby, sapphire, amethyst, jade, opal or topaz and organic gemstones such as amber or pearl, whether cut or uncut and whether or not having an industrial use.

Certificates etc. conferring rights in respect of assets

11

Certificates or other instruments which confer—

(a) property rights in respect of any asset falling within paragraphs 1, 9 or 10;

(b) any right to acquire, dispose of, underwrite or convert an asset, being a right to which the holder would be entitled if he held any such asset to which the certificate or instrument relates; or

Vouchers

12

Any voucher, stamp or similar document—

(a) whether used singularly or together with other such vouchers, stamps or documents; and

(b) which is capable of being exchanged for an asset falling within any other paragraph of this Part.

PART V — CERTAIN NON-CASH VOUCHERS TO BE DISREGARDED AS PAYMENTS IN KIND

1

(1) Subject to sub-paragraph (2), a non-cash voucher provided, to or for the benefit of the employed earner, by the employer or any other person on his behalf is to be disregarded in the calculation of an employed earner’s earnings by virtue of paragraph 1 of Part II only if it falls within any of paragraphs 2 to 9.

(2) A non-cash voucher may also be disregarded—

(a) by virtue of paragraph 7D of Part VIII (car fuel); ...

(aa) by virtue of paragraph 7E of Part 8 (van fuel); or

(b) in the circumstances specified in paragraph 4 of Part X (payments by way of incidental overnight expenses).

2

A non-cash voucher which is not treated as general earnings from employment for the purposes of section 86 of ITEPA 2003 (transport vouchers under pre-26th March arrangements).

3

A non-cash voucher exempted from liability to income tax under Chapter 4 of Part 3 by virtue of sections 266(1)(a) or 269 of ITEPA 2003 (exemptions: non-cash vouchers and credit-tokens).

4

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5

A non-cash voucher in respect of which no liability to income tax arises by virtue of section 266(1) of ITEPA 2003 to the extent that the voucher is used to obtain anything the direct provision of which would fall within any of the following provisions of that Act—

(a) section 246 (transport between work and home for disabled employees: general);

(b) section 247 (provision of cars for disabled employees);

(d) section 320C (recommended medical treatment).

6

A non-cash voucher to the extent that no liability to income tax arises by virtue of any of the following sections of ITEPA 2003—

(a) section 270 (exemption for small gifts of vouchers and tokens from third parties);

(b) section 305 (offshore oil and gas workers: mainland transfers);

(d) section 323 (long service awards);

(da) section 323A (trivial benefits provided by employers)

(e) section 324 (small gifts from third parties).

7

(1) A qualifying childcare voucher, where an eligible employee joined a scheme—

(a) before 6th April 2011;

(b) before 6th April 2011 but ceased to be employed by the employer and was subsequently re-employed by the employer and re-joined the scheme before 6th April 2011; or

(c) before 6th April 2011 and there was a continuous period of 52 weeks ending before 6th April 2011 throughout which vouchers were not being provided for the employee under the scheme,

subject to the qualifications in sub-paragraphs (2) and (5).

(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Where the chargeable expense of the voucher exceeds the exempt amount, only that amount shall be disregarded by virtue of sub-paragraph (1).

(3) The exempt amount is the amount found by the formula—

$$ExQW.$Here—E is the sum of— £55; andthe administration costs for the qualifying childcare voucher;QW is the number of qualifying weeks—for which the earner has been employed by the secondary contributor during the tax year in which the qualifying childcare voucher is provided; andfor which no other qualifying childcare voucher has been provided by the secondary contributor.$

(4) Where an earner has two or more employed earner's employments, the earnings from which fall to be aggregated in accordance with regulation 14 or 15, the reference to the secondary contributor in paragraph (b) of the definition of QW is a reference to the secondary contributor in respect any of those employments.

(5) An earner is only entitled to one exempt amount even if childcare vouchers are provided in respect of more than one child.

(6) In this paragraph “qualifying childcare voucher” means a non-cash voucher in relation to which Conditions A to C are met.

(7) Condition A is that the voucher is provided to enable an employee to obtain care for a child who—

(a) is a child or stepchild of the employee and is maintained (wholly or partly) at the employee’s expense; or

(b) is resident with the employee and is a person in respect of whom the employee has parental responsibility.

(8) Condition B is that the voucher can only be used to obtain qualifying child care.

(9) Condition C is that the vouchers are provided under a scheme that is open—

(a) to the employer’s eligible employees generally; or

(b) generally to those at a particular location,

subject to sub-paragraph (10).

(10) Where the scheme under which the vouchers are provided involves—

(a) relevant salary sacrifice arrangements; or

(b) relevant flexible remuneration arrangements,

Condition C is not prevented from being met by reason only that the scheme is not open to relevant low-paid employees.

8

A non-cash voucher provided to or for the benefit of an employed earner in respect of employed earner’s employment by a person who is not the secondary contributor in respect of the provision of that voucher.

PART VI — PENSIONS AND PENSION CONTRIBUTIONS

Pension payments and pension contributions disregarded

1

The payments mentioned in this Part are disregarded in the calculation of earnings for the purposes of earnings-related contributions.

Personal pension contributions by employers

2

A payment—

(a) by way of employer’s contribution towards a registered pension scheme to which section 308... of ITEPA 2003 (exemption of contributions to registered pension scheme) applies;

(b) by way of any benefit pursuant to a registered pension scheme to which—

(i) section 204(1) (authorised pensions and lump sums) of, and Schedule 31 (taxation of benefits under registered pension schemes) to, the Finance Act 2004 applies; or

(ii) section 208 or 209 of that Act (unauthorised payments) applies.

Approved schemes, relevant statutory schemes, pilots’ benefit funds and schemes established by overseas governments

3

(1) A payment by way of—

(a) an employer’s contribution to which paragraph 2 of Schedule 33 of the Finance Act 2004 (relief for employers' contributions) applies and any benefit referable to that contribution;

(b) an employer’s contribution to which article 15(2) of the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (employers with pre-commencement entitlement to corresponding relief) applies and any benefit referable to that contribution; ...

(ba) an employer’s contribution to a pension scheme established by a government outside the United Kingdom for the benefit of its employees or primarily for their benefit, and any benefit referable to such a contribution (whenever made);

(d) benefits from a pension scheme which are referable to contributions made before 6th April 2006, provided that section 386 of ITEPA 2003 did not apply to those contributions by virtue of section 390 of that Act; or

(e) benefits subject to the unauthorised payment charge imposed by section 208 of the Finance Act 2004 as applied to a relevant non-UK scheme by virtue of paragraph 1 of Schedule 34 to that Act.

(2) Expressions defined in Schedule 34 to the Finance Act 2004 have the same meaning in this paragraph as they have there.

Funded unapproved retirement benefit schemes.

4

A payment by way of relevant benefits pursuant to a retirement benefits scheme which has not been approved by the Board for the purposes of Chapter I of Part XIV of the Taxes Act and attributable to payments prior to 6th April 1998.

Payments to pension previously taken into account in calculating earnings

5

A payment by way of any benefit pursuant to a retirement benefits scheme which has not been approved by the Board for the purposes of Chapter I of Part XIV of the Taxes Act and attributable to payments on or after 6th April 1998 and before 6th April 2006 which have previously been included in a person’s earnings for the purpose of the assessment of his liability for earnings-related contributions.

Payments in good faith to scheme solely for providing approved benefits.

6

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Pensions exempt from UK taxation under double taxation agreements

7

(1) A payment to a pension scheme which is afforded relief from taxation by virtue of any of the following provisions, and any benefit referable to that payment—

(a) Article 25(8) of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (France) Order 1968;

(b) Article 17A of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (Republic of Ireland) Order 1976;

(bb) Article 27(2) of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (Canada) Order 1980;

(c) Article 28(3) of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income)(Denmark) Order 1980.

(d) Article 18 of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (The United States of America) Order 2002.

(e) Article 17(3) of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (South Africa) Order 2002;

(f) Article 17(3) of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (Chile) Order 2003.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART VII — PAYMENTS IN RESPECT OF TRAINING AND SIMILAR COURSES

Payments in respect of training and similar payment disregarded

1

The training payments and vouchers mentioned in this Part are disregarded in the calculation of an employed earner’s earnings.

2

A payment of, or contribution towards, expenditure incurred on providing work-related training which, by virtue of sections 250 to 254 of ITEPA 2003 (exemption for work-related training), is not to be taken as general earnings of the office or employment in connection with which it is provided.

Education and training funded by employers

3

A payment in respect of expenditure which, by virtue of section 255 of ITEPA 2003 (exemption for contributions to individual learning account training), is not to be taken as general earnings of the office or employment in connection with which it is provided.

New Deal 50plus: employment grant and training credit

4

A payment to a person, as a participant in the scheme arranged under section 2(2) of the Employment and Training Act 1973 and known as New Deal 50plus, of an employment credit or a training grant under that scheme.

Retraining courses for recipients of jobseeker’s allowance

5

A payment to a person as a participant in a scheme of the kind mentioned in section 60(1) of the Welfare Reform and Pensions Act 1999 (special schemes for claimants for jobseeker’s allowances) .

Payments to Jobmatch participants

6

A payment made to a participant in a Jobmatch Scheme (including a pilot) arranged under section 2(1) of the Employment and Training Act 1973 in his capacity as such.

Vouchers provided to Jobmatch participants

7

A payment by way of the discharge of any liability by the use of a voucher given to a participant in a Jobmatch Scheme (including a pilot), arranged under section 2(1) of the Employment and Training Act 1973, in his capacity as such.

PART VIII — TRAVELLING, RELOCATION AND OTHER EXPENSES AND ALLOWANCES OF THE EMPLOYMENT

Travelling, relocation and incidental expenses disregarded

1

The travelling, relocation and other expenses and allowances mentioned in this Part are disregarded in the calculation of an employed earner’s earnings.

Relocation expenses

2

(1) A payment of, or contribution towards, expenses reasonably incurred by a person in relation to a change of residence in connection with the commencement of, or an alteration in the duties of the person’s employment or the place where those duties are normally to be performed is disregarded if the conditions in sub-paragraphs (2) to (6) are met.

(2) The first condition is that—

(a) the payment or contribution—

(i) is not, by virtue of section 271 of ITEPA 2003 (limited exemption of removal benefits and expenses) liable to income tax as general earnings under that Act; or

(ii) would not have been so regarded, but is in fact disregarded by virtue of another provision of ITEPA 2003; ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The second condition is that the change of residence must result from—

(a) the employee becoming employed by an employer;

(b) an alteration of the duties of the employee’s employment (where his employer remains the same); or

(c) an alteration of the place where the employee is normally to perform the duties of his employment (where both the employer and the duties which the employee is to perform remains the same).

(4) The third condition is that the change of residence must be made wholly or mainly to allow the employee to have his residence within a reasonable daily travelling distance of—

(a) the place where he performs, or is to perform, the duties of his employment (in a case falling within paragraph (3)(a);

(b) the place where he performs, or is to perform, the duties of his employment (in a case falling within paragraph (3)(b); or

(c) the new place where he performs, or is to perform, the duties of his employment (in a case falling within paragraph (3)(c).

References in this sub-paragraph and sub-paragraph (5) to the place where the employee performs, or is to perform, the duties of his employment are references to the place where he normally performs, or is normally to perform, the duties of the employment.

(5) The fourth condition is that the employee’s former residence must not be within a reasonable daily travelling distance of the place where the employee performs or is to perform the duties of the employment.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) For the purposes of this paragraph, Chapter 7 of Part 4 of ITEPA 2003 shall be read as if sections 272 (1)(b), 272 (3)(b), 274 and 287 were omitted

Travelling expenses—general

3

A payment of, or a contribution towards, travel expenses which the holder of an office or employment is obliged to incur and pay as the holder of that office or employment but this paragraph is subject to paragraph 1A.

For the purposes of this paragraph—

(za) “ordinary commuting” means travel between—

(i) the employee’s home and a permanent workplace; or

(ii) a place that is not a workplace and a permanent workplace;

(zb) “private travel” means travel between—

(i) the employee’s home and a place that is not a workplace; or

(ii) two places neither of which is a workplace;

(a) “travel expenses” means amounts necessarily expended on travelling in the performance of the duties of the office or employment or other expenses of travelling which are attributable to the necessary attendance at any place of the holder of the office or employment in the performance of the duties of the office or employment and are not expenses of—

(i) ordinary commuting;

(ii) travel between any two places that is for practical purposes substantially ordinary commuting;

(iii) travel between any two places that is for practical purposes substantially private travel; or

(iv) private travel.

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) expenses of travel by the holder of an office or employment between two places at which he performs the duties of different offices or employments under or with companies in the same group are treated as necessarily expended in the performance of the duties which he is to perform at his destination; and

(d) for purpose of sub-paragraph (c) companies are to be taken to be members of the same group if and only if—

(i) one is a 51 per cent subsidiary of the other; or

(ii) both are 51 per cent subsidiaries of a third company

within the meaning of section 838(1)(a) of the Taxes Act (subsidiaries).

Travel and foreign travel expenses of overseas employees

4

A payment of, or a contribution towards, the expenses of the earner’s employment to the extent that those expenses—

(a) are deductible for income tax purposes in accordance with section 341 of ITEPA 2003 (travel at start or finish of overseas employment); or

(b) would be so deductible if—

(i) Conditions B and C were omitted from that section; and

(ii) the earnings of the employment were subject to income tax as employment income under that Act.

This paragraph is subject to paragraph 1A.

Travel expenses of employees not domiciled in the United Kingdom

5

So much of an employed earner’s earnings as equals the aggregate amount of the deductions—

(a) permitted for income tax purposes under sections 373 and 374 of ITEPA 2003 (travel costs and expenses of a non-resident or qualifying new resident employee or the employee’s spouse, civil partner or child where duties are performed in the United Kingdom ); or

(b) which would be so permitted if the earnings of the employment were subject to tax as employment income under ITEPA 2003.

This paragraph is subject to paragraph 1A.

Travelling expenses of workers on offshore gas and oil rigs

6

A payment of, or a contribution towards, expenses where that payment or contribution is disregarded for the purposes of calculating the emoluments general earnings under section 305 of ITEPA 2003 (offshore oil and gas workers: mainland transfers).

Incidental expenses in connection with cars provided for private use

7

(1) A payment—

(a) by way of the discharge of any liability which by virtue of section 239(1) of ITEPA 2003 (payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles); or

(b) of expenses, which by virtue of section 239(2) of that Act;

is not treated as general earnings of the employment chargeable to income tax....

(2) Sub-paragraph (1) does not apply so far as the payment is made pursuant to optional remuneration arrangements.

Car parking facilities

8

A payment of, or a contribution towards, the provision of car parking facilities at or near the earner’s place of employment which, by virtue of section 237 of ITEPA 2003, is not regarded as general earnings of the earner’s employment.

Specific and distinct payments of, or towards, expenses actually incurred

9

(1) For the avoidance of doubt, there shall be disregarded any specific and distinct payment of, or contribution towards, expenses which an employed earner actually incurs in carrying out his employment.

This is subject to the following qualifications.

(2) Sub-paragraph (1) does not authorise the disregard of any amount by way of relevant motoring expenditure, within the meaning of paragraph (3) of regulation 22A—

(a) in excess of that permitted by the formula in paragraph (4) of that regulation; or

(b) so far as it is paid pursuant to optional remuneration arrangements.

(3) Sub-paragraph (1) does not authorise the disregard of any amount which—

(a) falls within paragraphs (12) or (13) of regulation 22; or

(b) is paid to an employed earner in respect of anticipated expenses that have yet to be incurred (whether or not such expenses are actually incurred after the payment is made).

Council tax on accommodation provided for employee’s use

10

A payment of, or a contribution towards meeting a person’s liability for council tax or water or sewerage charges in respect of accommodation occupied by him and provided for him by reason of his employment if by virtue of sections 99 or 100 of ITEPA 2003 (accommodation provided for performance of duties or as a result of a security threat), he is not liable to income tax ... in respect of the provision of that accommodation.

Rates on accommodation provided for employee’s use

11

A payment of, or a contribution towards meeting, a person’s liability for rates or water or sewerage charges in respect of accommodation occupied by him and provided for him by reason of his employment if by virtue of sections 99 or 100 of ITEPA 2003 (accommodation provided for performance of duties or as a result of a security threat), he is not liable to income tax... in respect of the provision of that accommodation.

Foreign service allowance

12

A payment by way of an allowance which is not regarded as income for any income tax purpose by virtue of section 299 of ITEPA 2003 (Crown employees' foreign service allowance).

Commonwealth War Graves Commission and British Council: extra cost of living allowance

13

A payment by way of an allowance to a person in the service of the Commonwealth War Graves Commission or the British Council paid with a view to compensating him for the extra cost of living outside the United Kingdom in order to perform the duties of his employment.

Overseas medical treatment

14

A payment of, or a contribution towards, expenses incurred in—

(a) providing an employee with medical treatment outside the United Kingdom (including providing for him to be an in-patient) in a case where the need for the treatment arises while the employee is outside the United Kingdom for the purposes of performing the duties of his employment; or

(b) providing insurance for the employee against the cost of such treatment in a case falling within sub-paragraph (a).

PART IX — Incentives by way of securities.

Certain payments by way of shares, interests in shares and gains arising from them disregarded

1

(1) Payments by way of securities, restricted securities and restricted interests in securities, and gains arising from them, are disregarded in the calculation of an employed earner’s earnings to the extent mentioned in this Part.

(2) For the purposes of paragraphs 13, 15 and 16—

(a) “body corporate” includes—

(i) a body corporate constituted under the law of a country or territory outside the United Kingdom, and

(ii) an unincorporated association wherever constituted;

(b) “total discount” means the difference between the total value of the exercise price of the shares that are subject to the right in question and the total market value of that right;

(c) “total market value” means the price which the shares that are subject to the right in question might reasonably be able to fetch in the open market; and

(d) the total market value of the subsequent right is similar to the total market value of the first right if it is not substantially greater than the first right.

Shares in secondary contributor or associated body

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rights to acquire shares

3

A payment by way of a right to acquire securities.

Enterprise management incentives

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

A payment by way of an allocation of shares in priority to members of the public in respect of which no liability to income tax arises by virtue of section 542 of ITEPA 2003.

6

A payment that is deducted from the earnings of the employment under a partnership share agreement.

7

A payment by way of an award of shares under a share incentive plan within the meaning of Schedule 2 to ITEPA 2003.

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conditional interest in shares

9

(1) A payment by way of the acquisition of restricted securities, or a restricted interest in securities, where those securities are, or that interest is, employment-related, if no charge to income tax arises under section 425 of ITEPA 2003 other than by virtue of subsection (2) of that section.

This is subject to the following qualification.

(2) This paragraph does not apply if an election has been made as mentioned in subsection (3) of section 425 of ITEPA 2003.

(3) References in this paragraph to section 425 of ITEPA 2003 are to that section as substituted by paragraph 3(1) of Schedule 22 to the Finance Act 2003.

10

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Convertible shares

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares acquired under options granted before 9th April 1998

14

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assignment or release of option

15

A payment made by the Ministry of Defence to a person under the War Widows Recognition Payment Scheme.

Exercise, assignment or release of options acquired before 6th April 1999

16

A payment to which no liability to income tax arises by virtue of any of the following provisions of ITEPA 2003—

(a) section 292 (accommodation expenses of MPs);

(b) section 293 (overnight expenses of other elected representatives);

(ca) section 293B (UK travel expenses of other elected representatives);

(d) section 294 (European travel expenses of MPs and other representatives).

PART X — MISCELLANEOUS AND SUPPLEMENTAL

Other miscellaneous payments to be disregarded

1

(1) The payments listed in this Part are disregarded in the calculation of earnings.

(2) Paragraph 4 contains additional rules about the way in which the components of a payment by way of expenses incidental to a qualifying absence from home are to be treated for the purpose of earnings-related contributions if the permitted maximum is exceeded.

Payments on account of sums already included in the computation of earnings

2

A payment on account of a person’s earnings in respect of his employment as an employed earner which comprises, or represents and does not exceed sums which have previously been included in his earnings for the purpose of his assessment of earnings-related contributions.

Payments discharging liability for secondary Class 1 contributions following election under paragraph 3B of Schedule 1 to the Contributions and Benefits Act

3

A payment by way of the discharge of any liability for secondary Class 1 contributions which has been transferred from the secondary contributor to the employed earner by election made jointly by them for the purposes of paragraph 3B(1) of Schedule 1 to the Contributions and Benefits Act (elections about contribution liability in respect of relevant employment income) .

Payments by way of incidental expenses

4

(1) A payment by way of incidental overnight expenses, in whatever form, which by virtue of section 240 of ITEPA 2003 are not general earnings liable to income tax under that Act.

(2) If a payment is made by way of incidental overnight expenses in connection with a qualifying period, but the amount of that payment (calculated in accordance with section 241 of ITEPA 2003) exceeds the permitted amount, sub-paragraphs (3) to (6) apply.

(3) So much of the payment as is made by way of cash shall be included in the calculation of earnings.

(4) The amount of cash for which a cash voucher can be exchanged shall be included in the calculation of earnings.

(5) The cost of provision of any non-cash voucher shall be included in the calculation of earnings and anything for which the voucher can be exchanged shall be disregarded in that calculation.

(6) Any payment by way of a benefit in kind shall be disregarded in the calculation of earnings.

(7) In this paragraph—

“the cost of provision” in relation to a non-cash voucher is the cost incurred by the person at whose expense the voucher is provided;

“the permitted amount” has the meaning given in section 241(3) of ITEPA 2003; and

“qualifying period” has the meaning given in section 240(1)(b) and (4) of ITEPA 2003.

Gratuities and offerings

5

(1) A payment of, or in respect of, a gratuity or offering which—

(a) satisfies the condition in either sub-paragraph (2) or (3); and

(b) is not within sub-paragraph (4) or (5).

(2) The condition in this sub-paragraph is that the payment—

(a) is not made, directly or indirectly, by the secondary contributor; and

(b) does not comprise or represent sums previously paid to the secondary contributor.

(3) The condition in this sub-paragraph is that the secondary contributor does not allocate the payment, directly or indirectly, to the earner.

(4) A payment made to the earner by a person who is connected with the secondary contributor is within this sub-paragraph unless—

(a) it is—

(i) made in recognition for personal services rendered to the connected person by the earner or by another earner employed by the same secondary contributor; and

(ii) similar in amount to that which might reasonably be expected to be paid by a person who is not so connected; or

(b) the person making the payment does so in his capacity as a tronc-master.

(5) A payment made to the earner is within this sub-paragraph if it is made by a trustee holding property for any persons who include, or any class of persons which includes, the earner.

In this sub-paragraph “trustee” does not include a tronc-master.

(6) A person is connected with the secondary contributor for the purposes of this paragraph if his relationship with the secondary contributor, or where the employer and secondary contributor are different, with either of them, is as described in subsection (2), (3), (4), (5), (6) or (7) of section 839 of the Taxes Act (connected persons).

Redundancy payments

6

For the avoidance of doubt, in calculating the earnings paid to or for the benefit of an earner in respect of an employed earner’s employment, any payment by way of a redundancy payment shall be disregarded.

Sickness payments attributable to contributions made by employed earner

7

If the funds for making a sickness payment under arrangements of the kind mentioned in section 4(1)(b) of the Contributions and Benefits Act are attributable in part to contributions to those funds made by the employed earner, for the purposes of section 4(1) of that Act the part of that payment which is attributable to those contributions shall be disregarded.

Expenses and other payments not charged to income tax under miscellaneous exemptions

8

A payment which is not charged to tax under any of the following provisions of ITEPA 2003—

(a) section 245 (travelling and subsistence during public transport strikes);

(b) section 246 (transport between work and home for disabled employees: general);

(d) section 290A (accommodation outgoings of ministers of religion);

(e) section 290B (allowances paid to ministers of religion in respect of accommodation outgoings);

(f) section 321 (suggestion awards).

VAT on the supply of goods and services by employed earner

9

If—

(a) goods or services are supplied by an earner in employed earner’s employment;

(b) earnings paid to or for the benefit of the earner in respect of that employment include the remuneration for the supply of those goods or services; and

an amount equal to the value added tax chargeable on that supply shall be excluded from the calculation of those earnings.

Employee’s indemnity insurance

10

A payment which by virtue of section 346 of ITEPA 2003 (deduction for employee liabilities) is deductible from the general earnings of the employment chargeable to tax under that Act.

This paragraph is subject to paragraph 1A of Part 8 of this Schedule.

Fees and subscriptions to professional bodies, learned societies etc

11

A payment of, or a contribution towards any fee, contribution or annual subscription which, under section 201(1) of the Taxes Act (fees and subscriptions to professional bodies, learned societies etc) is deductible from the emoluments of any office or employment. This paragraph is subject to paragraph 1A of Part 8 of this Schedule.

Holiday pay

12

A payment in respect of a period of holiday entitlement where—

(a) the sum paid is derived directly or indirectly from a fund—

(i) to which more than one secondary contributor contributes, and

(ii) the management and control of which are not vested in those secondary contributors; or

(b) the person making the payment is entitled to be reimbursed from such a fund.

Payments to ministers of religion

13

A payment of a fee in respect of employment as a minister of religion which does not form part of the stipend or salary paid in respect of that employment.

Payments in lieu of coal

14

(1) A payment in lieu of the provision of coal or smokeless fuel, if the employee is—

(a) a colliery worker;

(b) a former colliery worker;

and the condition in sub-paragraph (2) is met.

(2) The condition is that the amount of coal or fuel in respect of which the payment is made does not substantially exceed the amount reasonably required for personal use.

(3) That condition is assumed to be met unless the contrary is shown.

(4) In this paragraph, “colliery worker” means a coal miner or any other person employed at or about a colliery otherwise than in clerical, administrative or technical work; and “former colliery worker” shall be construed accordingly.

(5) This paragraph does not apply to Northern Ireland.

SCHEDULE 4 — Provisions derived from the Income Tax Acts and the Income Tax (Pay As You Earn) Regulations 2003

PART I — GENERAL

Interpretation

1

(1) In this Schedule the “PAYE Regulations” means the Income Tax (Pay As You Earn) Regulations 2003.

(2) In this Schedule, except where the context otherwise requires—

“aggregated” means aggregated and treated as a single payment under paragraph 1(1) of Schedule 1 to the Act;

“allowable pension contributions” means any sum paid by an employee by way of contribution towards a pension fund or scheme which is withheld from the payment of PAYE income and for which a deduction must be allowed from employment income under section 592(7) or 594(1) of the Taxes Act (exempt approved schemes and exempt statutory schemes);

“closed tax year” means any year preceding the current year and cognate expressions shall be construed accordingly;

“Compensation of Employers Regulations” means the Statutory Maternity Pay (Compensation of Employers) and Miscellaneous Amendments Regulations 1994 ...

“deductions working sheet” means any form of record on or in which are to be kept the matters required by this Schedule in connection with an employee’s general earnings and earnings-related contributions ... ...

“earnings-related contributions” means contributions payable under the Act by or in respect of an employed earner in respect of employed earner’s employment;

“employed earner” and “employed earner’s employment” have the same meaning as in the Act;

“employee” means any person in receipt of ... earnings;

“employer” means the secondary contributor determined—

(a) by section 7 of the Act;

(b) under regulation 5 of, and Schedule 3 to, the Social Security (Categorisation of Earners) Regulations 1978; or

...

“Inland Revenue” means any officer of the Board of Inland Revenue;

“mariner” has the same meaning as in regulation 115;

“non-Real Time Information employer” means an employer other than one within sub-paragraph (4);

“Real Time Information employer” has the meaning given in sub-paragraph (4);

...

“tax month” means the period beginning on the 6th day of any calendar month and ending on the 5th day of the following calendar month;

“tax period” means a tax quarter where paragraph 11 has effect, but otherwise means a tax month;

“tax quarter” means the period beginning on 6th April and ending on 5th July, or beginning on 6th July and ending on 5th October, or beginning on 6th October and ending on 5th January, or beginning on 6th January and ending on 5th April;

“voyage period” has the same meaning as in regulation 115;

“year” means tax year;

and other expressions have the same meaning as in the Income Tax Acts.

(3) For the purposes of paragraphs 7(13), 9, 10, 11 and 22, “primary Class 1 contributions” and “earnings-related contributions” shall, unless the context otherwise requires, include any amount paid on account of earnings-related contributions in accordance with the provisions of regulation 8(6).

(4) The following are Real Time Information employers for the purposes of this Schedule—

(a) an employer who has entered into an agreement with HMRC to comply with the provisions of this Schedule which are expressed as relating to Real Time Information employers;

(b) an employer within sub-paragraph (5);

(d) on and after 6th October 2013, all employers.

(5) An employer is within this paragraph if the employer has been given a general or specific direction by the Commissioners for Her Majesty's Revenue and Customs before 6th October 2013 to deliver to HMRC returns under paragraph 21A of this Schedule (real time returns of information about payments of ... earnings).

Multiple employers

2

(1) If—

(a) an employer has made an election under regulation 98 of the PAYE Regulations to be treated as a different employer in respect of each group of employees specified in the election, and

(b) no improper purpose notice has been given, or if one has been given it has been withdrawn,

he shall be treated as having made an identical election for the purposes of this Schedule.

(2) In this paragraph an “improper purpose notice” is a notice issued to the employer stating that it appears to the Inland Revenue that the election is made wholly or mainly for an improper purpose within the meaning of regulation 99(2) of the PAYE Regulations.

Intermediate employers

3

(1) Where an employee works for a person who is not his immediate employer, that person shall be treated as the employer for the purpose of this Schedule, and the immediate employer shall furnish the principal employer with such particulars of the employee’s ... earnings as may be necessary to enable the principal employer to comply with the provisions of this Schedule.

(2) In this paragraph—

“the principal employer” means the person specified as the relevant person in the direction referred to in sub-paragraph (4), and

“the immediate employer” means the person specified as the contractor in that direction.

(3) If the employee’s ... earnings are actually paid to him by the immediate employer—

(a) the immediate employer shall be notified by the principal employer of the amount of earnings-related contributions which may be deducted when those earnings are paid to the employee, and may deduct the amount so notified to him accordingly; and

(b) the principal employer may make a corresponding deduction on making to the immediate employer the payment out of which those earnings will be paid.

(4) This paragraph only applies if a direction has been given by the Board under section 691 of ITEPA 2003 (PAYE: mobile UK workforce).

(5) Where an employee is paid a sickness payment which by virtue of regulation 23 is not made through the secondary contributor in relation to the employment—

(a) the person making that payment shall furnish the secondary contributor with such particulars of that payment as may be necessary to enable the secondary contributor to comply with this Schedule; and

(b) for the purposes only of this Schedule the secondary contributor shall be deemed to have made the sickness payment.

4

If, under this Schedule, a person pays any earnings-related contributions which, under section 6(4) of the Act , another person is liable to pay, his payment of those contributions shall be made as agent for that other person.

Inspectors and Collectors

5

Any legal proceedings or administrative act authorised by or done for the purposes of this Schedule and begun by one Inland Revenue officer may be continued by another officer, and any officer may act for any division or other area.

6

(1) Every employer, on making during any year to any employee any payment of ... earnings in respect of which earnings-related contributions are payable, or are treated as payable...—

(a) shall, if he has not already done so, prepare ... a deductions working sheet for that employee, and

(b) may deduct earnings-related contributions in accordance with this Schedule.

(1A) Where a liability to pay retrospective contributions has arisen in respect of an employee, an employer shall amend the relevant deductions working sheet or where necessary prepare one in respect of that employee.

(2) Subject to sub-paragraph (3), an employer shall not be entitled to recover any earnings-related contributions paid or to be paid by him on behalf of any employee otherwise than by deduction in accordance with this Schedule.

(3) Sub-paragraph (2) does not apply to secondary Class 1 contributions in respect of which an election has been made jointly by the secondary contributor and the employed earner for the purposes of paragraph 3B(1) of Schedule 1 to the Act (election in respect of transfer of secondary contribution liability on relevant employment income) if the election provides for the collection of the amount in respect of which liability is transferred.

Calculation of deduction

7

(1) Subject to sub-paragraph (2), on making any payment of ... earnings to the employee, the employer may deduct from those ... earnings the amount of the earnings-related contributions based on those ... earnings ... which the employee is liable to pay under section 6(4) of the Act (the “section 6(4)(a) amount”).

(1A) On making any chain payment the deemed employer may deduct the amount of earnings related contributions calculated by reference to the deemed direct earnings which the deemed employer is liable to pay.

(1B) In sub-paragraph (1A) “chain payment”, “deemed direct earnings” and “deemed employer” have the meanings given in regulations 14(2)(a), 14(3) and 20(5) respectively of the Social Security Contributions (Intermediaries) Regulations 2000.

(2) Where two or more payments of ... earnings fall to be aggregated, the employer may deduct the amount of the earnings-related contributions based on those ... earnings, which are payable by the employee, either wholly from one such payment or partly from one and partly from the other or any one or more of the others.

(3) If the employer–

(a) on making any payment of ... earnings to an employee does not deduct from those ... earnings the full section 6(4)(a) amount, or

(b) is treated as making a payment of ... earnings by paragraph 4A,

he may recover, in a case falling within paragraph (a) the amount not so deducted or, in a case falling within paragraph (b) the section 6(4)(a) amount, by deduction from any subsequent payment of ... earnings made by the employer to that employee during the same year and, where the case falls within paragraph (b) or sub-paragraph 4(a) or (f), during the following year.

This sub-paragraph is subject to sub-paragraphs (4) and (5).

(3A) Where an amount has been treated as retrospective earnings paid to or for the benefit of an employee, the employer may deduct the retrospective contributions based on those earnings from any payment of ... earnings made by him to that employee—

(a) after the relevant retrospective contributions regulations come into force, and

(b) during the same and the following year.

This sub-paragraph is subject to sub-paragraph (5).

(4) Sub-paragraph (3) applies only where—

(a) the under-deduction occurred by reason of an error made by the employer in good faith;

(b) the ... earnings in respect of which the under-deduction occurred are treated as earnings by virtue of regulations made under section 112 of the Act (certain sums to be earnings);

(d) the ... earnings in respect of which the under-deduction occurred are, by virtue of regulation 23, not paid through the secondary contributor in relation to the employment; ...

(e) the employer is treated as making a payment of ... earnings by paragraph 4A; or

(f) the payment in question is made to a person whose place of employment is outside the United Kingdom and on whose ... earnings Class 1 contributions are, but income tax is not, payable.

(5) For the purposes of sub-paragraphs (3), (3A), (4), (8) and (11)—

(a) the amount which by virtue of those sub-paragraphs may be deducted from any payment, or from any payments which fall to be aggregated, shall be an amount in addition to, but not in excess of, the amount deductible from those payments under the other provisions of this Schedule; and

(b) for the purposes of Part III of this Schedule an additional amount which may be deducted by virtue of those sub-paragraphs in a case falling within paragraph (a) of any of those sub-paragraphs except sub-paragraph (3A) shall be treated as an amount deductible under this Schedule only in so far as the amount of the corresponding under-deduction has not been so treated.

This is subject to the following qualification.

(5A) Where a payment—

(a) falls within sub-paragraph (4)(e) or (f),

(b) comprises a beneficial interest in securities, or

sub-paragraph (5B) applies.

(5B) If this sub-paragraph applies—

(a) sub-paragraph (5)(a) shall have effect as if “, but not in excess of,” were omitted; and

(b) sub-paragraph (8) shall have effect as if at the end there were added “or the following year”

(6) Sub-paragraph (8) applies where an employer makes a payment consisting either soley of non-monetary earnings, or a combination of monetary and non-monetary earnings, to—

(a) an employee;

(b) an ex-employee,

and at the time of the payment of those earnings there are no, or insufficient, monetary earnings from which the employer could deduct the section 6(4)(a) amount.

(7) In sub-paragraph (6)(b) “ex-employee” means a person who—

(a) ceases to be employed by the employer in a particular year (“the cessation year”); and

(b) receives such earnings from the employer after the cessation of employment but in the cessation year.

(8) Where, in the circumstances specified in sub-paragraph (6), the employer–

(a) does not deduct from the earnings referred to in that sub-paragraph the full section 6(4)(a) amount, or

(b) is treated as making a payment of ... earnings by paragraph 4A,

he may recover, in a case falling within paragraph (a) the amount not so deducted or, in a case falling within paragraph (b) the section 6(4)(a) amount, by deduction from any subsequent payment of monetary earnings to that employee, or ex-employee (as the case may be) during the same year.

This sub-paragraph is subject to sub-paragraph (5).

(9) Sub-paragraph (11) applies if—

(a) a person (“the ex-employee”) ceases in a particular tax year (“the cessation year”) to be employed by a particular employer (“the employer”); and

(b) the ex-employee receives from the employer in the cessation year, after the cessation of employment, earnings in the form of—

(i) a beneficial interest in securities,

(ii) a conditional interest in securities or a beneficial interest in convertible securities treated as earnings under regulation 22(5), (6) or (7),

(iii) any gain on which the ex-employee is chargeable to tax by virtue of section 4(4)(a) of the Act; and

(c) at the time of the payment of those earnings there are no monetary earnings, or insufficient monetary earnings, from which the employer could deduct the section 6(4)(a) amount.

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) Where, in the circumstances specified in sub-paragraph (9), the employer has not deducted, from the earnings referred to in sub-paragraph (9)(b), the full amount of earnings-related contributions which by virtue of this Schedule he is entitled to deduct, he may, without prejudice to sub-paragraph (8) but subject to sub-paragraph (12)(b), recover the amount so under-deducted by deduction from the proceeds of sale of some, or all, of—

(a) the securities referred to in of sub-paragraph 9(b)(i) and (ii); or

(b) the securities which form the subject matter of the option referred to in sub-paragraph (9)(b)(iii).

(12) For the purposes of sub-paragraph (11)—

(a) the whole of the amount under-deducted may be recovered from the proceeds of sale of some, or all, of the securities referred to in that sub-paragraph; and

(b) the employee’s prior written consent to that sale and the recovery of all or part of the under-deduction from the proceeds thereof, shall be required.

(13) Subject to sub-paragraph (14), the employer shall record on the deductions working sheet for that employee the name and national insurance number of the employee, the year to which the working sheet relates, the appropriate category letter in relation to the employee (being the appropriate category letter indicated by the Board) and, in so far as relevant to that category letter, the following particulars regarding every payment of ... earnings which he makes to the employee namely—

(a) the date of payment;

(b) the amount of—

(i) earnings up to and including the current lower earnings limit where earnings equal or exceed that figure,

(ii) earnings which exceed the current lower earnings limit but do not exceed the current primary threshold,

(iii) earnings which exceed the current primary threshold but do not exceed the current upper earnings limit,

(iiia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(iv) the sum of the primary Class 1 contributions and secondary Class 1 contributions payable on all the employee’s earnings, other than contributions recovered under sub-paragraph (3); and

(v) the primary Class 1 contributions payable on the employee’s earnings;

(vi) any statutory maternity pay;

(vii) any ... statutory paternity pay;

(viia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(viii) any statutory adoption pay; ...

(ix) any statutory shared parental pay; and

(x) any statutory parental bereavement pay ; and

(xi) any statutory neonatal care pay.

...

(14) Where 2 or more payments of ... earnings fall to be aggregated, the employer, instead of recording under heads (iv) and (v) of sub-paragraph (13)(b) separate amounts in respect of each such payment, shall under each head record a single amount, being the total of the contributions appropriate to the description specified in that head, in respect of the aggregated payments.

(15) When an employer pays ... earnings he shall record under the name of the employee to whom he pays the ... earnings—

(a) the date of payment;

(b) the amount of the ... earnings, excluding any allowable pension contributions; and

and retain the record for a period of three years after the end of the tax year in which the ... earnings were paid.

Records where liability transferred from secondary contributor to employed earner: relevant employment income

8

Where an election has been made for the purposes of paragraph 3B(1) of Schedule 1 to the Act (elections about transfer of liability for secondary contributions in respect of relevant employment income), the secondary contributor shall maintain records containing—

(a) a copy of any such election;

(b) a copy of the notice of approval issued by the Inland Revenue under paragraph 3B(1)(b) of that Schedule;

(d) the name of the employed earner; and

(e) the national insurance number allocated to the employed earner.

Certificate of contributions paid

9

(1) Where the employer is required to give the employee a certificate in accordance with regulation 67 of the PAYE Regulations (information to employees about payments and tax deducted (Form P 60)), the employer shall enter on the certificate, in respect of the year to which the certificate relates—

(a) the amount of any earnings up to and including the current lower earnings limit where earnings equal or exceed that figure;

(b) the amount of any earnings in respect of which primary Class 1 contributions were, by virtue of section 6A of the Act, treated as having been paid, which exceed the current lower earnings limit but do not exceed the current primary threshold...;

(c) the amount of any earnings in respect of which primary Class 1 contributions were payable which exceed the current primary threshold but do not exceed the current upper earnings limit...;

(ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) the amount of the earnings, if any, recorded under paragraphs (b) and (c), above the current lower earnings limit, in respect of which primary Class 1 contributions were payable or, where section 6A of the Act and regulation 127 applies, were treated as having been paid, at the reduced rate;

(e) the amount of primary Class 1 contributions paid by the employee;

(f) the amount of statutory maternity pay paid to the employee;

(g) the amount of ... statutory paternity pay paid to the employee;

(ga) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...

(h) the amount of statutory adoption pay paid to the employee; ...

(i) the amount of statutory shared parental pay paid to the employee; and

(j) the amount of statutory parental bereavement pay paid to the employee;; and

(k) the amount of statutory neonatal care pay paid to the employee;

and shall enter the amounts under paragraph (e) under the appropriate category letter indicated by the Inland Revenue.

(2) Where the employer is not required to give the employee a certificate in accordance with regulation 67 of the PAYE Regulations, because no tax has been deducted from the employee’s relevant payments during the year concerned..., but the employee—

(a) has paid, or

(b) is treated, by virtue of section 6A of the Act, as having paid,

primary Class 1 contributions in that year, the employer shall nevertheless give the employee such a certificate showing the information referred to in sub-paragraph (1).

(3) In sub-paragraph (2), “relevant payments” has the meaning given in the PAYE Regulations.

10

(1) Subject to sub-paragraph (1A) and paragraph 11 and 15(8), the employer shall pay the amount specified in sub-paragraph (2) to the Inland Revenue within 14 days or, if payment is made by an approved method of electronic communications in respect of earnings paid after 5th April 2004, within 17 days of the end of every ... tax month.

(1A) This paragraph does not apply in respect of amounts of retrospective earnings.

(2) The amount specified in this sub-paragraph is the total amount of earnings-related contributions due in respect of ... earnings paid by the employer in that ... tax month, (and, where required, reported under paragraph 21A or 21D) other than amounts deductible under paragraph 7(2) which he did not deduct and amounts which he deducted under the Compensation of Employers Regulations....

(3) For the purposes of sub-paragraph (2), if two or more payments of ... earnings fall to be aggregated, the employer shall be treated as having deducted from the last of those payments the amount of any earnings-related contributions deductible from those payments which he did not deduct from the earlier payments.

(3A) The amount specified in sub-paragraph (2) must be adjusted to take account of errors corrected under paragraph 21E(5), other than in cases where paragraph 21E(4) applies, or failures rectified under paragraph 21EA(2).

(4) Where the amount specified in sub-paragraph (2) has been adjusted to take account of an error as provided for in sub-paragraph (3A) and the value of the adjustment is a negative amount, that amount is treated as having been paid to HMRC—

(a) 17 days after the end of the tax month in which the correction is made if payment is made using an approved method of electronic communications, and

(b) 14 days after the end of the tax month in which the correction is made, in any other case.

11

(1) Subject to sub-paragraph (1A) and paragraph 15(8), the employer shall pay the amount specified in sub-paragraph (2) to the Inland Revenue within 14 days of the end of every ... tax quarter or, if payment is made by an approved method of electronic communications in respect of earnings paid after 5th April 2004, within 17 days of the end of every tax quarter where—

(a) the employer has reasonable grounds for believing that the condition specified in sub-paragraph (4) applies and chooses to pay the amount specified in sub-paragraph (2) quarterly; or

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1A) This paragraph does not apply in respect of amounts of retrospective earnings.

(2) The amount specified in this sub-paragraph is the total amount of earnings-related contributions due in respect of ... earnings paid by the employer in that ... tax quarter, (and, where required, reported under paragraph 21A or 21D) other than amounts deductible under paragraph 7(2) which he did not deduct and amounts which he deducted under the Compensation of Employers Regulations....

(3) For the purposes of sub-paragraph (2), where two or more payments of ... earnings fall to be aggregated, the employer shall be deemed to have deducted from the last of those payments the amount of any earnings-related contributions deductible from those payments which he did not deduct from the earlier payments.

(3A) The amount specified in sub-paragraph (2) must be adjusted to take account of errors corrected under paragraph 21E(5), other than in cases where paragraph 21E(4) applies, or failures rectified under paragraph 21EA(2).

(3B) Where the amount specified in sub-paragraph (2) has been adjusted to take account of an error as provided for in sub-paragraph (3A) and the value of the adjustment is a negative amount, that amount is treated as having been paid to HMRC—

(a) 17 days after the end of the tax quarter in which the correction is made if payment is made using an approved method of electronic communications, and

(b) 14 days after the end of the tax quarter in which the correction is made, in any other case.

(4) The condition specified in this sub-paragraph is that for tax months falling within the current year, the average monthly amount found by the formula below will be less than £1500.

The formula is—

(N + P + L + S) − (SP + CD)

$The expressions used in the formula have the following values. Nis the amount which would be payable to the Inland Revenue under the Social Security Contributions and Benefits Act 1992 and these Regulations but disregarding—any amount of secondary Class 1 contributions in respect of which liability has been transferred to the employed earner by an election made jointly by the employed earner and the secondary contributor for the purpose of paragraph 3B(1) of Schedule 1 to the Act (transfer of liability to be borne by the earner); andany amount payable in respect of retrospective earnings;... “P” is the amount which would be payable to HMRC under regulation 67G or 68 of the PAYE Regulations but disregarding any amount payable in respect of retrospective employment income (within the meaning of regulation 2 of those Regulations); L is the amount which would be payable to the Inland Revenue under regulation 54(1) of the Education (Student Loans) (Repayment) Regulations 2009 (payment of repayments deducted to HMRC) if the reduction referred to in paragraph (3) of that regulation ...were disregarded. S is the sum of the amounts which the employer would be liable to deduct, under section 559 of the Taxes Act and the Income Tax (Sub-contractors in the Construction Industry) Regulations 1993, from payments made by him.... SP is the amount—recoverable by the employer from the Inland Revenue, ordeductible from amounts for which the employer would otherwise be accountable to the Inland Revenue,in respect of payments to his employees by way of ... statutory maternity pay, statutory paternity pay, statutory shared parental pay, statutory adoption pay and statutory parental bereavement pay , statutory parental bereavement pay and statutory neonatal care pay. CD is the amount which would be deducted by others from sums due to the employer, in his position as a sub-contractor, under section 559 of the Taxes Act.$

12

(1) The Inland Revenue shall give a receipt to the employer for the total amount paid under paragraph 10, 11 or 11A if so requested, but if a receipt is given for the total amount of earnings-related contributions and any tax paid at the same time, a separate receipt need not be given for earnings-related contributions.

(2) Subject to sub-paragraph (3), if the employer has paid to the Inland Revenue on account of earnings-related contributions under paragraph 10, 11 or 11A an amount which he was not liable to pay, or which has been refunded in accordance with regulation 2 of the Social Security (Refunds) (Repayment of Contractual Maternity Pay) Regulations 1990 (refunds of contributions), the amounts which he is liable to pay subsequently in respect of other payments of ... earnings made by him during the same year shall be reduced by the amount overpaid, so however that if there was a corresponding over-deduction from any payment of ... earnings to an employee, this paragraph shall apply only in so far as the employer has reimbursed the employee for that over-deduction.

(3) Sub-paragraph (2) applies only if—

(a) the over-deduction occurred by reason of an error by the employer in good faith;

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) a refund has been made under regulation 2 of the Social Security (Refunds) (Repayment of Contractual Maternity Pay) Regulations 1990.

Payment of Class 1B contributions

13

(1) A person who is liable to pay a Class 1B contribution (“the employer”), shall pay that Class 1B contribution to the Inland Revenue not later than 19th October or, if payment is made by an approved method of electronic communications in respect of earnings paid after 5th April 2004, not later than 22nd October in the year immediately following the end of the year in respect of which that contribution is payable.

(2) If the employer has paid to the Inland Revenue under this paragraph an amount in respect of Class 1B contributions which he was not liable to pay, he shall be entitled to deduct the amount overpaid from any payment in respect of secondary earnings-related contributions which he is liable to pay subsequently to the Inland Revenue under paragraph 10 or 11 for any ... tax period in the same year.

14

(1) If within 17 days of the end of any ... tax period a non-Real Time Information employer has paid no amount of earnings-related contributions to the Inland Revenue under paragraph 10 or 11 for that ... tax period and the Inland Revenue is unaware of the amount, if any, which the employer is liable so to pay, the Inland Revenue may give notice to the employer requiring him to render, within 14 days, a return in the prescribed form showing the amount of earnings-related contributions which the employer is liable to pay to the Inland Revenue under that paragraph in respect of the ... tax period in question.

(2) Where a notice given by the Inland Revenue under sub-paragraph (1) extends to two or more consequent income tax periods, the provisions of this Schedule shall have effect as if those ... tax periods were one ... tax period.

(3) If the Inland Revenue is not satisfied that an amount of earnings-related contributions paid ... under paragraph 10 or 11 for any ... tax period is the full amount which the employer is liable to pay..., the Inland Revenue may give a notice under sub-paragraph (1) despite the payment of that amount.

15

(1) If after 17 days following the end of any ... tax period the employer has paid no amount of earnings-related contributions to HMRC under paragraph 10 or 11 for that ... tax period and there is reason to believe that the employer is liable to pay such contributions, HMRC, upon consideration of the employer’s record of past payments whether of earnings-related contributions or of combined amounts, may to the best of their judgment specify the amount of earnings-related contributions or of a combined amount which they consider the employer is liable to pay and give notice to him of that amount.

(1A) For the purposes of this paragraph “combined amount” is an amount which includes earnings-related contributions due under these regulations and one or more of the following—

(a) tax due under the PAYE Regulations;

(b) amounts due under the Income Tax (Construction Industry Scheme) Regulations 2005;

(1B) In arriving at an amount under paragraph (1), HMRC may also take into account any returns made by the employer under this Schedule in the tax period in question or earlier tax periods.

(2) If, on the expiration of the period of 7 days allowed in the notice, the specified amount ... or any part thereof is unpaid, the amount so unpaid—

(a) shall be treated for the purposes of this Schedule as an amount of earnings-related contributions or as including an amount of earnings-related contributions which the employer was liable to pay for that ... tax period in accordance with paragraph 10 or 11; and

(b) may be certified by HMRC.

(3) The provisions of sub-paragraph (2) shall not apply if, during the period allowed in the notice, the employer pays to HMRC the full amount of earnings-related contributions which the employer is liable to pay under paragraph 10 or 11 for that ... tax period, or the employer satisfies HMRC that no amount of such contributions is due.

(4) The production of a certificate such as is mentioned in sub-paragraph (2) shall, until the contrary is established, be sufficient evidence that the employer is liable to pay to HMRC the amount shown in it; and any document purporting to be such a certificate as aforesaid shall be deemed to be such a certificate until the contrary is proved.

(5) Where the employer has paid no amount of earnings-related contributions under paragraph 10 or 11 for any ... tax periods, a notice may be given by HMRC under sub-paragraph (1) which extends to two or more consecutive ... tax periods, and this Schedule shall have effect as if those ... tax periods were the latest ... tax period specified in the notice.

(6) A notice may be given by HMRC under sub-paragraph (1) notwithstanding that an amount of earnings-related contributions has been paid ... by the employer under paragraph 10 or 11 for any ... tax period, if, after seeking the employer’s explanation as to the amount of earnings-related contributions paid, HMRC is not satisfied that the amount so paid is the full amount which the employer is liable to pay ... for that period, and this paragraph shall have effect accordingly, save that sub-paragraph (2) shall not apply if, during the period allowed in the notice, the employer satisfies HMRC that no further amount of earnings-related contributions is due for the relevant ... tax period.

(7) Where, during the period allowed in a notice given by HMRC under sub-paragraph (1), the employer claims, but does not satisfy HMRC, that the payment ... made in respect of any ... tax period specified in the notice is or includes the full amount of earnings-related contributions he is liable to pay to HMRC for that period, the employer may require HMRC to inspect the employer’s documents and records as if HMRC had called upon the employer to produce those documents and records in accordance with Schedule 36 to the Finance Act 2008 (information and inspection powers) and the provisions of paragraph 26A shall apply in relation to that inspection, and the notice given by HMRC under sub-paragraph (1) shall be disregarded in relation to any subsequent time.

(8) Notwithstanding anything in this paragraph, if the employer pays any amount of earnings-related contributions certified by HMRC under it whether separately or as part of a combined amount and that amount exceeds the amount which he would have been liable to pay in respect of that ... tax period apart from this paragraph, he shall be entitled to set off such excess against any amount which he is liable to pay to HMRC under paragraph 10 or 11 for any subsequent ... tax period.

(9) If, after the end of the year, the employer renders the return required by paragraph 22(1) and the total earnings-related contributions he has paid in respect of that year in accordance with this Schedule exceeds the total amount of such contributions due for that year, any excess not otherwise recovered by set-off shall be repaid.

16

(1) The ... Tax Acts and any regulations under section 684 of ITEPA 2003 (PAYE regulations) relating to the recovery of tax shall apply to the recovery of—

(a) any amount of earnings-related contributions which an employer is liable to pay HMRC for any ... tax period in accordance with paragraph 10 or 11 or which he is treated as liable to HMRC whether separately or as part of a combined amount for any ... tax period under paragraph 15; or

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The Social Security (Contributions) Regulations 2001

Convertible interest in shares

8

Assignment or release of right to acquire shares where neither right nor shares readily convertible

9

Assignment or release of a right, acquired as director or employee before 6th April 1999, to acquire shares where neither right nor shares readily convertible

10

Exercise of right to acquire shares gained as director or employee before 6th April 1999

11

Interpretation of paragraphs 9, 10 and 11

12

Apportionment of a payment from a retirement benefits scheme for the benefit of two or more people

13

Valuation of non-cash vouchers

14

Apportionment of earnings comprised in a cash or non-cash voucher provided for benefit of two or more employed earners

15

SCHEDULE 3 — PAYMENTS TO BE DISREGARDED IN THE CALCULATION OF EARNINGS FOR THE PURPOSES OF EARNINGS-RELATED CONTRIBUTIONS

PART I — INTRODUCTORY

Introduction

1

Interpretation

2

PART II — PAYMENTS IN KIND

Certain payments in kind to be disregarded

1

Payments by way of assets not to be disregarded

2

PART III — PAYMENTS BY WAY OF READILY CONVERTIBLE ASSETS NOT DISREGARDED AS PAYMENTS IN KIND

1

2

3

PART IV — PAYMENTS BY WAY OF SPECIFIC ASSETS NOT DISREGARDED AS PAYMENTS IN KIND

Shares and stock

1

Certain debentures and other securities for loans

2

Loans stocks of public and local authorities

3

Warrants etc for loan stock and debentures

4

Units in collective investment schemes

5

Options to acquire assets, currency, precious metals or other options

6

Contracts for futures

7

Contracts for differences or to secure profit by reference to movements of indices

8

Alcoholic liquor on which duty has not been paid

9

Gemstones

10

Certificates etc. conferring rights in respect of assets

11

Vouchers

12

PART V — CERTAIN NON-CASH VOUCHERS TO BE DISREGARDED AS PAYMENTS IN KIND

1

2

3

4

5

6

7

8

PART VI — PENSIONS AND PENSION CONTRIBUTIONS

Pension payments and pension contributions disregarded

1

Personal pension contributions by employers

2

Approved schemes, relevant statutory schemes, pilots’ benefit funds and schemes established by overseas governments

3

Funded unapproved retirement benefit schemes.

4

Payments to pension previously taken into account in calculating earnings

5

Payments in good faith to scheme solely for providing approved benefits.

6

Pensions exempt from UK taxation under double taxation agreements