National Insurance Contributions Act 2011

National Insurance Contributions Act 2011

2011 CHAPTER 3

Commentary on Sections

Part 2: Regional secondary contributions holiday for new businesses

Section 7: The appropriate amount

59. This section specifies what the appropriate amount is in respect of a qualifying employee.

60. Subsection (1) provides that this amount is “the relevant amount of secondary Class 1 contributions”.

61. That phrase is then defined in subsection (2) as the amount of secondary Class 1 contributions which P is liable to pay in respect of relevant earnings.

62. Subsection (3) defines “relevant earnings”. A qualifying employee’s earnings will not automatically attract the Holiday. To attract the Holiday:

• the earnings need to be paid in respect of employment as an employee for the purposes of the new business;

• they need to be paid during the holiday period; and

• they need to be paid when the principal place at which the business is carried on is not in any of the excluded regions.

63. So subsection (3) provides that the requirement for the business not to be in any of the excluded regions must be satisfied at any time when it is paying earnings to a qualifying employee as well as at the time when the business starts.

64. Subsection (4) provides that the appropriate amount is capped at the first £5,000 of employer NICs. This limit is applied in relation to each qualifying employee separately.

65. Subsection (5) ensures that this section is consistent with the special NICs timing rules which apply to earnings paid to mariners. The calculation of primary and secondary Class 1 contributions in respect of earnings paid to mariners proceeds largely in the same manner as other employed earners except that there are special rules where a mariner’s earnings are paid at the end of his voyage. Subsection (5) is intended to ensure that earnings paid in respect of that part of the voyage that falls during the holiday period count for the purposes of the Holiday, despite the fact that they may not be paid until after the holiday period has ended.

66. Subsection (6) is concerned with contracted-out NICs. If the qualifying employee is contracted out of the State Earnings Related Pension Scheme, P will pay secondary NICs at a rebated (i.e. reduced) rate. Some contracted-out scheme rules require the employer to pay the rebate into an occupational pension scheme or other pension provider. Accordingly, subsection (6) gives employers of contracted-out qualifying employees the benefit of deducting employer NICs at the full, non-contracted-out rate, so that they can pay the rebate to the pension provider.