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

Explanatory Note

(This note is not part of the Regulations)

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

Regulation 2 amends the definitions in regulation 1(2) of the principal Regulations 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 Act 1992 (c. 4) (“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 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 section 50(4) of the Social Security Act 1998, 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.

The 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.

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 the conferment of a beneficial interest in any asset or voucher falling within the new Schedule 1B to the principal Regulations.

New paragraph (11) provides for the calculation of earnings comprised in any payment by way of the conferment of a conditional interest in shares. New paragraph (12) makes incidental provision for the purposes of new paragraph (11).

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

Regulation 6 amends regulation 19 of the principal Regulations (payments to be disregarded) by substituting sub-paragraphs (l) and (m) and adding four new sub-paragraphs (zd) to (zg). Substituted sub-paragraph (l) 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 (m) 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(4) adds new sub-paragraphs (zd) to (zg). New sub-paragraph (zd) relates to a payment by way of the conferment of a conditional interest in shares, new sub-paragraph (ze) to a payment by way of a conditional interest in shares, new sub-paragraph (zf) to a payment by way of a beneficial interest in convertible shares and new sub-paragraph (zg) relates to 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.

Regulation 6(5) substitutes paragraph (5) of regulation 19 of the principal Regulations and limits the application of regulation 19(1)(d) 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(6) to (8) make amendments consequential upon the insertion of the new Schedule 1B to the principal Regulations and regulation 6(9) makes incidental provision for the purposes of new sub-paragraph (zg).

Regulation 7 inserts new regulation 22H into 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 (Class 1A contributions) to be calculated to the nearest £0.01 and for any amount of £0.005 or less to be disregarded.

Regulation 8 amends Schedule 1 to the principal Regulations (interpretation) 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 new Schedule 1B to the principal regulations.

[These Regulations impose no costs on business.]