ERSM170710 – Employment Related Securities Manual – HMRC internal manual – GOV.UK what does housing benefit cover

Shares and share options derived from employment are earnings. However all were disregarded from nics as they fall to be defined as payments in kind. Payments in kind are disregarded from earnings by virtue of regulation 19(1)(d).

Reg. 19(5) and schedule 1A list payments that cannot be disregarded from earnings even though they are payments in kind. Shares and share options are now liable to class 1 nics subject to exceptions below.

Sets out how to calculate the amount of earnings on which class 1 nics are due when nics liability arises on shares and or share options. Amendments take account of trading arrangements and make provision for the consideration the employee pays to acquire the shares/options to be deducted from the amount on which nics were due.

19(1)(l) amended to reflect the fact that only own company shares a) acquired under an IR approved scheme or b) were non-tradeable could be disregarded from earnings for class 1 nics purposes.What does housing benefit cover all own company shares, which are unapproved and tradeable and non-own company shares derived from employment, are subject to class 1 nics.

19(1)(m) amended to reflect the fact that only options to acquire shares which are a) acquired under an IR approved scheme or b) non tradeable options over non tradeable shares can be disregarded from earnings for class1 nics purposes. All other options derived from employment are subject to class 1 nics.

A new paragraph that disregards from earnings, gains made on exercise, assignment, release of a share option, i.E. Amounts on which income tax is due under section 135 of ICTA 1988. Rationale being that the change of treatment of gains from share option would align with the tax treatment from the beginning of a tax year i.E. 6 april 1999.

Treats as earnings amount chargeable to tax under schedule E in respect of the acquisition, on or after 9/4/98, of shares or an interest in conditional and convertible shares (S 140A to 140H ICTA 1988) where shares are RCA’s.What does housing benefit cover

Amendments made to the calculation of the amount of earnings on which class 1 nics are due to take account of the RCA, conditional and convertible shares legislation. Unforeseen impact means nics not due on share options at all until rectified 25 november 1998.

Some provisions relating to conditional and convertible shares which allow for certain payments to be disregarded from earnings. Reg. 19(1)(zd)(iii) disregards from earnings shares appropriated under an IR approved profit sharing scheme within section 186 of ICTA 1988.

Makes provision for regulations to be made to deem as earnings any amount on which the earner is, by virtue of any provision of S140A to 140H of income and corporation taxes act 1988, chargeable to income tax under schedule E.

Legislation amended/inserted by the social security contributions, statutory maternity pay and statutory sick pay (miscellaneous amendments) regulations 1999 (SI 1999no. 567) legislation amended/inserted

what does housing benefit cover

Calculates the earnings on gains realised on the assignment or release of share options which are not rcas, i.E. Have not exercised options but have received a payment for assigning or releasing their right.

Para omitted as this made a provision to disregard gains made on exercise of share options between 8 september 1998 and 5 april 1999. From 6/4/99 nics due on gains determined under section 135 of ICTA 1988 section 4)(4)(a) SSCBA 1992 now applies.

Makes provision for no nics to be charged at the time that post april 1999 options are exercised for conditional shares, which are conditional for more than 5 years. NICs will be due when the conditions are lifted.

Disregards from earnings the payment of secondary nics liability, which had been transferred from the secondary contributor to the employed earner, where the primary contributor does not meet that liability.What does housing benefit cover

Amends provision about being able to deduct nics from primary contributors to take account of the fact that where an election is made, secondary nics can be deducted from the primary contributor’s share option gains.

Amends the provisions in schedule 1 about payments and recovery of nics to take account of secondary nics liability transferred from secondary contributors to the primary contributor on share option gains.

Reg. 18 and 19 are substituted by new reg. 18 and 19s. They introduce 2 new schedules, schedule 1ZB (calculation of earnings for the purposes of earnings-related nics in particular cases) and schedule 1ZC (payments to be disregarded in the calculation of earnings for the purposes of nics).

With effect from 6 april 2001 the social security (contributions) regulations 1979 (SI1979 no. 591) and the northern ireland equivalent were consolidated into the social security (contributions) regulations 2001 (SI 2001 no. 1004) principal legislation relating to shares/options

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The social security contributions (share options) act 2001 does not amend any legislation. It allowed employers to settle any nics liability on share options granted to employees and directors between 6 april 1999 and 19 may 2000.

The social security contributions (share options) act 2001 contains provisions for the limitation of liability to pay nics in respect of gains arising on the exercise, assignment or release of certain share options. For these provisions to be used, a notice must be given to IR within 92 days of 11 may 2001. The regulations make provisions relating to such notices. For example, reg. 3 sets out what must be contained in such notices.

When SSCR 1979 were consolidated into SSCR 2001 missed out provision in reg. 19(1)(zi) of SSCR 1979. Para 3A makes provision for disregarding a payment of earnings by way of the grant of short options on or after 6/4/99.What does housing benefit cover

Social security (contributions) (amendment no 3) regulations 2003 (SI2003/1059) takes effect from 10 april 2003. Amends schedule 2 SS(C) R 2001 inserting new paragraph 11A which explains how to calculate earnings where value of shares increased for non-commercial reasons.

Amends paragraph 16 part IX of schedule 3 and introduces new paragraph 17 which imposes a new test. Payments from pre 6 april 1999 options not disregarded if value of shares increased by more than 10% for non-commercial reasons.

Amends regulation 40 SS(C) R 2001 to reflect that class 1A is not due on securities that are not readily convertible assets. This was an unintended omission from 1 september 2003. – see TB SE 7 december 2003.

Defines ‘relevant employment income’ at regulation 1(2) SS(C)R2001 in relation to rcas. Amends para 7 of schedule 2 to reflect that the tax relieving provisions relating to the payment of secondary nics under election by employee do not relate to the calculation of earnings for nics purposes.What does housing benefit cover

Further amendment to paragraph 7 of schedule 4 SS(C)R2001. Extends the recovery rights of an employer to enable him, with employee’s agreement, to retain or sell securities to meet the primary nics liability.