The Social Security (Miscellaneous Amendments No. 2) Regulations 2015

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make a number of miscellaneous amendments to various Statutory Instruments concerning social security.

The majority of the amendments contained in Part 1 make consequential amendments to the Social Security (Contributions) Regulations 2001 (“the 2001 Regulations”) following the coming into force of the National Insurance Contributions Act 2015 (“the 2015 Act”). This Act provides that from 6th April 2015 self-employed earners with profits in a tax year of £5,965 or over will pay Class 2 contributions via the self-assessment system.

Regulation 2 introduces the amendments to the 2001 Regulations.

Regulation 3 inserts a new definition of “due date” for Class 2 contributions in order to align the date with the due date for Income Tax and Class 4 contributions under the self-assessment system. The opportunity is also taken to make a house keeping amendment to include a reference to “employment and support allowance” in the definitions.

Regulations 4 to 6 make minor consequential amendments bringing the language into line with the provisions of the 2015 Act.

Regulations 7 to 9 make amendments to regulations 67, 72 and 73. These amendments (which are not consequential on the 2015 Act) provide that for the purposes of national insurance contributions an employed earner has to be in receipt of “earnings” as defined in accordance with sections 3, 4 and 112 of the Social Security Contributions and Benefits Act 1992 (c. 4) (“the 1992 Act”) and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) and not general earnings as defined by both Acts as references to section 7 of the Income Tax Pensions and Earnings Act 2003 (c. 1) (“ITEPA”).

Regulation 10 makes a consequential change to regulation 87A.

Regulation 11 inserts new regulation 87AA. This regulation which is consequential on the coming into force of the 2015 Act, contains a new requirement for a person to notify HMRC if they start or stop self-employment for tax years for which Class 2 contributions will be collected through self-assessment.

Regulation 12 makes consequential amendments to regulation 89.

Regulation 13 inserts new regulation 89A. This regulation enables HMRC to collect Class 2 payments for the tax years up to 2014-15. In particular it enables HMRC to issue a written notice of amounts outstanding for the last half of the 2014-15 tax year and provides that the outstanding amount must be paid by 31st July 2015.

Regulation 14 inserts new regulation 90ZA. This regulation enables qualifying women (including their spouse or civil partner) to pay Class 2 contributions before the end of the tax year even though liability to pay or not will not have been established at that stage. This will ensure that the changes do not adversely impact this group.

Regulations 15 and 16 make consequential amendments to regulations 95 and 125.

Regulation 17 inserts new regulation 148B which makes a modification to section 11 of the 1992 Act in order to ensure that profits earned overseas can be treated as if they were “relevant profits”. The modification will operate in respect of a group of self-employed earners who are liable to pay Class 2 contributions by virtue of EU Regulations but whose profits do not fall within the definition of “relevant profits” in section 11. The definition of “relevant profits” is modified so as to ensure that the defined group will be treated as if they were earning profits in the UK. Those whose profits reach the small profits threshold will be liable to pay Class 2 contributions and those whose profits fall under the threshold will be entitled to pay Class 2 contributions. Regulation 18 makes provision for this group to make returns, pay the contributions and keep and preserve appropriate records.

Regulations 19 and 20 make consequential amendments to regulation 151 and 152.

Regulation 21 amends Schedule 3 of the 2001 Regulations. Paragraph (2) amends Part 6. paragraph 10A of the Schedule is amended to provide that payments under the Armed Forces Early Departure Payment Scheme 2014 are to be disregarded when calculating a person’s earnings for the purposes of establishing liability for earnings-related national insurance contributions. This amendment comes into force on 1st April 2015.

Paragraph (3) of regulation 21 amends Part 9 of Schedule 3 by inserting new paragraph 18. This paragraph makes provision with regard to employment-related securities (“ERS income”) of internationally mobile employees. Chapters 2 to 5 of Part 7 of ITEPA 2003 make provision for the calculation of amounts that count as employment income in relation to ERS income for the purposes of establishing a charge to tax under Part 2 of ITEPA 2003. Chapter 5B of Part 2 of ITEPA 2003 makes provision for special rules to apply to the ERS income of internationally mobile employees. The ERS income is apportioned between income that is taxable as it arises, income that is taxable if and when it is remitted and income that is not taxable. The apportionment is normally done on a time basis, depending on the employee’s residence status and the location of their duties over the period for which the ERS income is treated as having been earned.

Section 4(4)(a) of the 1992 Act and Regulation 22(7) of the 2001 Regulations provide that the full amount of the ERS income constitutes earnings for the purpose of establishing liability for earnings-related national insurance contributions. Schedule 3 to the 2001 Regulations provides for certain payments to be disregarded in the calculation of earnings for the purpose of establishing liability for earnings-related national insurance contributions. The new paragraph 18 provides a disregard for the proportion of the ERS income which is attributable to periods in which the individual would not otherwise be liable for earnings-related national insurance contributions (owing to residence conditions, EU social security rules or an international social security convention). The ERS income is treated as having been earned over the same period as applies for the purposes of Chapter 5B of Part 2 of ITEPA 2003.

Regulation 22 amends Schedule 4 of the 2001 Regulations. Paragraphs (2), (3), (4) and (6) amend the Schedule so as to remove references to general earnings in line with the amendments made by regulations 7 to 9. Paragraph (5) substitutes paragraph 23. This paragraph requires an employer to notify HMRC that the employer has either recovered the whole or any part of a Secondary Class 1 contribution from an employee pursuant to an agreement described in paragraph 3A(2) of Schedule 1 to the 1992 Act or that liability for payment of the contribution has been transferred to the employee pursuant to an election under paragraph 3B of of that Schedule.

Regulation 23 makes an amendment to Schedule 4A to remove the reference to general earnings.

Regulation 24 makes a number of amendments and revocations to the 2001 Regulations consequential on the coming into force of the 2015 Act.

Regulations 25 and 26 amend the Social Security (Categorisation of Earners) Regulations 1978 (S.I. 1978/1689) and the Social Security (Categorisation of Earners) (Northern Ireland) Regulations 1978 (S.R 1978 No. 401) so as to replace the reference to general earnings with a reference to “earnings”.

Regulations 27 to 38 make consequential amendments to the Income Support (General) Regulations 1987 (1987/1967), the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (S.I. 1992/1815), the Jobseeker’s Allowance Regulations 1996 (S.I. 1996/207), the Social Security Benefit (Computation of Earnings) Regulations 1996 (S.I. 1996/2745), the Child Support (Maintenance Calculations and Special Cases) Regulations 2000 (S.I. 2001/155), the Housing Benefit Regulations 2006 (S.I. 2006/213), the Housing Benefit (Persons who have attained the qualifying age for state pension credit) Regulations 2006 (S.I. 2006/214), the Employment and Support Allowance Regulations 2008 (S.I. 2008/794), the Universal Credit Regulations 2013 (S.I. 2013/376), the Jobseeker’s Allowance Regulations 2013 (S.I. 2013/378) and the Employment and Support Allowance Regulations 2013 (S.I. 2013/379), in particular so as to align the language and legislative references with those contained in the 2015 Act.

Regulation 39 introduces a Schedule which makes various housekeeping revocations consequential on the changes made to the definition of employed earner and changes made by the 2015 Act.

A Tax Information and Impact Note covering the changes made by the 2015 Act was published on 17th July 2014 and is available on the website at http://www.gov.gov.uk/government/collections/tax-information-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.

A Tax Information and Impact Note was published on 16th July 2013 which considered the impact of changing the definition of employed earner and is available on the website at http://www.gov.gov.uk/government/collections/tax-information-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.

A Tax Information and Impact Note covering the amendment made by Regulation 21(2) was published on 10th December 2014 alongside the draft Finance Bill and is available on the website at http://www.gov.gov.uk/government/collections/tax-information-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.

.A Tax Information and Impact Note covering the amendment made by Regulation 21(3) was published on 10th December 2013 alongside the draft legislation for Chapter 5B of Part 2 of ITEPA 2003 and is available on the website at http://www.gov.gov.uk/government/collections/tax-information-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.

A Tax Information and Impact Note covering the amendment made by regulation 22(5) was published on 10th December 2013 alongside Finance Bill 2014 draft legislation on employee share schemes and is available on the website at http://www.gov.gov.uk/government/collections/tax-information-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.