PART 2ASSESSMENT OF EARNINGS RELATED CONTRIBUTIONS

Payments to directors which are to be disregarded27

1

For the purposes of earnings-related contributions, there shall be excluded from the calculation of a person’s earnings any payment in so far as it is a payment—

a

by a company;

b

to or for the benefit of a director of that company;

c

in respect of any employed earner’s employment of that director with that company; and

d

in respect of which paragraph (2), (3) or (4) is satisfied.

2

This paragraph is satisfied if—

a

the director is a partner in a firm carrying on a profession;

b

being a director of a company is a normal incident of membership of that profession and of membership of the firm of the director;

c

the director is required by the terms of his partnership to account to his firm for the payment; and

d

the payment forms an insubstantial part of that firm’s gross returns.

3

This paragraph is satisfied if—

a

the director was appointed to that office by a company having the right to do so by virtue of its shareholding in, or an agreement with, the company making the payment;

b

by virtue of an agreement with the company that appointed him, the director is required to account for the payment to that company; and

c

the payment forms part of the profits brought into charge to corporation tax or income tax of the company that appointed the director.

4

This paragraph is satisfied if—

a

the director was appointed to that office by a company other than the company making the payment;

b

by virtue of an agreement with the company that appointed him, the director is required to account for the payment to that company;

c

the payment forms part of the profits brought into charge to corporation tax of the company that appointed the director; and

d

the company that appointed the director is not one over which—

i

the director has, or

ii

any person connected with the director has, or

iii

the director and any persons connected with him together have,

control.

5

In this regulation—

a

“company” has the meaning given by section 832(1) and (2) of the Taxes Act (interpretation of the Tax Acts);

b

“the director” means the director to or for the benefit of whom the payment referred to in paragraph (1) is made; and

c

in paragraph (4)(d)—

i

“control” has the same meaning as in section 840 of the Taxes Act,

ii

“any person connected with the director” means any of the following, namely the spouse, parent, child, son-in-law or daughter-in-law of the director.