The Social Security (Contributions) (Amendment No. 3) Regulations (Northern Ireland) 1998

Explanatory Note

(This note is not part of the Regulations.)

These Regulations further amend the Social Security (Contributions) Regulations (Northern Ireland) 1979 (“the principal Regulations”).

Regulation 2 amends regulation 1 of the principal Regulations by inserting new definitions of “conditional interest in shares”, “convertible shares” and “readily convertible asset”, omitting the definition of “trading arrangements” and adding a new paragraph (3) to take account of the amendments made by the subsequent regulations.

Regulation 3 amends regulation 6A of the principal Regulations by adding a new paragraph (6) which enables directors and companies employing them to make payments on account of their social security contribution liability.

Regulation 4 inserts a new regulation 17AB into the principal Regulations which treats as earnings for the purposes of section 3 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (“the Contributions and Benefits Act”) any amount on which an employed earner is, by virtue of any provision of sections 140A to 140H of the Income and Corporation Taxes Act 1988, chargeable to income tax under Schedule E in respect of the acquisition of certain types of shares or an interest in them. In accordance with the provisions of Article 47(4) of the Social Security (Northern Ireland) Order 1998 (“the Order”), the new regulation 17AB applies to the acquisition of those shares, or an interest in them, on or after 9th April 1998.

Regulation 5 amends regulation 18 of the principal Regulations to provide for the calculation of earnings in respect of a payment in the form of a conditional interest in shares, convertible shares and a readily convertible asset—

(a) new paragraph (8) provides for the calculation of earnings comprised in any payment by way of the conferment of a beneficial interest in any asset falling within paragraph 9ZA or 9ZB of Schedule 1A to the principal Regulations which is not a readily convertible asset and any voucher falling within paragraph 9B of that Schedule which is not capable of being exchanged for a readily convertible asset;

(b) new paragraphs (9) and (10) provide for the calculation of earnings comprised in any payment by way of the conferment of a beneficial interest in any asset falling within Schedule 1A to the principal Regulations which is a readily convertible asset; any voucher falling within paragraph 9B of that Schedule where the asset for which it is capable of being exchanged is also a readily convertible asset; any payment by way of any asset or voucher falling within the new Schedule 1B to the principal Regulations;

(c) new paragraph (11) provides for the calculation of earnings comprised in any payment by way of the conferment of a conditional interest in shares;

(d) new paragraph (12) makes incidental provision for the purposes of the new paragraph (11);

(e) new paragraphs (13) and (14) provide for the calculation of earnings comprised in any payment by way of the conferment of a beneficial interest in convertible shares;

(f) new paragraph (15) makes incidental provision for the purposes of the new paragraph (14).

Regulation 6(a)(i) and (ii) amends regulation 19(1) of the principal Regulations by substituting sub-paragraphs (k) and (l). Substituted sub-paragraph (k) relates to shares which are not readily convertible assets and which form part of the ordinary share capital of the secondary contributor or a company having control in relation to that contributor. Substituted sub-paragraph (l) relates to a right to acquire shares where neither that right nor those shares which can be acquired under it are readily convertible assets.

Regulation 6(a)(iii) also amends regulation 19(1) of the principal Regulations by excluding from the computation of a person’s earnings for the purposes of earnings-related contributions—

(a) a payment by way of the conferment of a conditional interest in shares (new sub-paragraph (z));

(b) a payment by way of a conditional interest in shares (new sub-paragraph (za));

(c) a payment by way of a beneficial interest in convertible shares (new sub-paragraph (zb));

(d) a payment of, or contribution towards, qualifying travelling expenses which the holder of an office or employment is obliged to incur and defray out of the emoluments of the office or employment (new sub-paragraph (zc)).

Regulation 6(b) substitutes paragraph (5) of regulation 19 of the principal Regulations and limits the application of regulation 19(1)(d) of those Regulations by providing that that regulation shall not include any payment by way of the conferment of a beneficial interest in any asset falling within Schedule 1A to the principal Regulations or any contract of insurance constituting Class I (life and annuity business), Class III (linked long term business) and Class VI (capital redemption business) under Schedule 1 to the Insurance Companies Act 1982 or any beneficial interest in any asset falling within the new Schedule 1B to the principal Regulations.

Regulation 6(c) to (e) makes amendments consequential upon the insertion of the new Schedule 1B to the principal Regulations and regulation 6(f) makes incidental provision for the purposes of the new sub-paragraph (zc) of regulation 19(1) of the principal Regulations.

Regulation 7 adds a new regulation 22H to the principal Regulations which provides for a Class 1A contribution calculated in accordance with the provisions of section 10 of the Contributions and Benefits Act to be calculated to the nearest £0·01 and for any amount of £0·005 or less to be disregarded. It also amends the heading to Part IIA of the principal Regulations as a consequence of the addition of the new regulation 22H.

Regulation 8 amends Schedule 1 to the principal Regulations by adding a new paragraph (2) to Regulation 2 which provides for references to “primary Class 1 contributions” and “earnings-related contributions” in that Schedule to extend to payments on account of earnings-related contributions for certain purposes.

Regulation 9 makes amendments to Schedule 1A to the principal Regulations consequential upon the insertion of the new Schedule 1B to those Regulations.

Regulation 10 inserts a new Schedule 1B into the principal Regulations.

Regulation 11 contains revocations.

Section 4(6) of the Contributions and Benefits Act, one of the enabling provisions under which these Regulations are made, was added by Article 47(2) of the Order which came into operation on 1st July 1998 by virtue of Article 1(3)(b) of the Order. Article 47(4), a further enabling provision, also came into operation on 1st July 1998 by virtue of the said Article 1(3)(b). Section 3(4) of, and paragraph 5(a) of Schedule 1 to, the Contributions and Benefits Act, some of the remaining enabling provisions, were added and substituted respectively by Article 46 of, and paragraph 58(6) of Schedule 6 to, the Order which are brought into operation on 9th September 1998 by virtue of the Social Security (1998 Order) (Commencement No. 1) Order (Northern Ireland) 1998 (S.R. 1998 No. 312 (C. 15)).

These Regulations correspond to provision contained in Regulations made by the Secretary of State for Social Security in relation to Great Britain and accordingly, by virtue of section 149(3) of, and paragraph 10 of Schedule 5 to, the Social Security Administration (Northern Ireland) Act 1992 (c. 8) are not subject to the requirement of section 149(2) of that Act for prior reference to the Social Security Advisory Committee.