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National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019

Contents

Commentary on provisions of Act

Termination Awards

Section 1: Termination awards: Great Britain

  1. Subsection (1) provides for amendments to section 10 of the SSCBA 1992.
  2. Subsection (2) inserts new subsections (1A), (1B) and (1C) into section 10 of the SSCBA 1992.
  3. New subsection (1A) provides that a Class 1A contribution is payable in respect of an amount of a payment or benefit received by an earner in connection with the termination of the earner’s employment (termination award). It further clarifies that the amount paid as a termination award, and on which the new Class 1A liability will arise, must count as employment income under section 403 of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) and that the earner is chargeable to tax on the termination award under section 403 ITEPA 2003.
  4. New subsection (1B) prevents double charging by providing that Class 1A contributions payable under new subsection (1A) are not payable on an amount of earnings on which Class 1 contributions are also payable.
  5. New subsection (1C) clarifies that the employment from which the termination award arises must be the employed earner’s employment.
  6. Subsection (3) amends section 10(2) of the SSCBA 1992 so that the section’s existing purpose, clarifying who is liable to pay a Class 1A contribution, is restricted to Class 1A contributions other than that paid on a termination award.
  7. Subsection (4) inserts new subsection (3A) into section 10 of the SSCBA 1992. New subsection (3A) clarifies who is liable to pay a Class 1A contribution on termination awards under new subsection (1A). It is the person who would be liable to pay secondary Class 1 NICs if the amount of earnings were subject to Class 1.
  8. Subsection (5) amends section 10(4) of the SSCBA 1992 so that the section’s existing purpose, explaining how the amount of a Class 1A contribution is calculated, is restricted to Class 1A NICs other than that paid on a termination award.
  9. Subsection (6) inserts a new subsection (4A) into section 10 of the SSCBA 1992. New subsection (4A) clarifies how the amount of a Class 1A NICs payable on a termination award is calculated by using the Class 1A percentage.
  10. Subsection (7) amends section 10(5) of the SSCBA 1992 so that it applies to both existing subsection (4) and new subsection (4A).
  11. Subsection (8) amends subsection (9)(a) of section 10 of the SSCBA 1992 so that the Treasury may by regulations provide that Class 1A NICs are not to be payable in respect of general earnings or termination awards.
  12. Subsection (9) inserts new subsection (12) after subsection (11) of section 10 of the SSCBA 1992. This new subsection clarifies that a termination award means a payment or benefit received by an earner (or their spouse, civil partner, blood relative or dependent) in connection with the termination of the earner’s employment.
  13. Subsection (10) amends the heading of section 10 of the SSCBA 1992, removing reference to "benefits in kind etc." to reflect that the provisions of the section now apply more widely than just to Class 1A NICs due on benefits in kind.
  14. Subsection (11) amends section 162(5)(c) of the Social Security Administration Act 1992 to ensure that Class 1A NICs paid on termination awards are included in the calculation of the allocation of payments to the National Health Service.

Section 2: Termination awards: Northern Ireland

  1. This section mirrors the effect of section 1 in Northern Ireland legislation.

Sporting Testimonials

Section 3: Sporting testimonials: Great Britain

  1. This section provides for any Class 1A NICs liability arising on taxable sporting testimonial payments by virtue of section 226E of ITEPA 2003 and section 10 of the SSCBA 1992 to be met by third party controllers of sporting testimonials.
  2. The controller will be liable to pay Class 1A NICs due on sporting testimonial payments that comprise cash as well as benefits in kind.
  3. Subsection (1) provides for amendments to the SSCBA 1992.
  4. Subsection (2) inserts into section 10 of the SSCBA 1992 a reference to new section 10ZBA which will provide for the new Class 1A NICs liability on sporting testimonial payments to be placed on the controller of a sporting testimonial.
  5. Subsection (3) inserts into section 10ZA of the SSCBA 1992 new subsection (1A). This new subsection makes clear that section 10ZA will not apply if the benefit being provided by the third party consists of a sporting testimonial payment.
  6. Subsection (4) inserts into the SSCBA 1992 new section 10ZBA.
  7. New section 10ZBA(1) defines the circumstances in which a sporting testimonial controller will be liable to pay Class 1A contributions. Three conditions must be satisfied:
  • a Class 1A NICs liability must be payable for the tax year in respect of general earnings paid to an earner;
  • those general earnings must consist in a sporting testimonial payment; and
  • the controller of the sporting testimonial making the payment must not be the person who, but for new section 10ZBA, would be liable to pay Class 1A NICs on those general earnings.
  1. New subsection 10ZBA(2) provides that the controller of the sporting testimonial is liable to pay the Class 1A NICs due in respect of the sporting testimonial payment instead of the earner’s employer.
  2. New subsections 10ZBA(3), (4) and (5) deal with cases where the controller of the sporting testimonial pays an amount to discharge any liability of the earner to pay income tax in the relevant tax year in respect of a sporting testimonial payment. Normally, a payment of an earner’s income tax by someone other than the earner himself constitutes a payment of earnings for NICs purposes on which a Class 1 NICs liability arises. New subsection (4) provides that where such an amount is paid by the controller of the sporting testimonial, that amount is to be treated as a payment of general earnings and is to be ignored in the computation of the earner’s earnings for Class 1 NICs purposes. The combined effect of sub sections (3), (4) and (5) is to require the controller of a sporting testimonial to pay Class 1A NICs on any payment made by him to discharge the earner’s tax liability on the sporting testimonial payment.
  3. New subsection 10ZBA(6) provides that the expressions used in this section have the same meaning as in section 226E of ITEPA 2003.

Section 4: Sporting testimonials: Northern Ireland

  1. This section mirrors the effect of section 3 in Northern Ireland legislation.

General

Section 5: Extent, commencement and short title

  1. Subsection (1) provides that sections 1 and 3 of the Act extend to England and Wales and Scotland. Sections 2 and 4 extend to Northern Ireland. This section extends to England and Wales, Scotland and Northern Ireland.
  2. Subsection (2) provides that section 5 comes into force on the day the Act is passed.
  3. Subsection (3) provides that the other provisions of the Act come into force on such a day as the Treasury may appoint by regulations made by statutory instrument.
  4. Subsection (4) provides that regulations:
  • may appoint different days for different purposes or different areas; and
  • may include transitional, transitory or saving provision.
  1. Subsection (5) provides for the Act to be known as the National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019.

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