The Social Security (Contributions) Regulations 2001

Calculation of deduction U.K.

7.—(1) Subject to sub-paragraph (2), on making any payment of [F1 general earnings] to the employee, the employer may deduct from those [F1 general earnings] the amount of the earnings-related contributions based on those [F1 general earnings] F2 ... which the employee is liable to pay under section 6(4) of the Act [F3 (the “section 6(4)(a) amount”)] .

(2) Where two or more payments of [F1 general earnings] fall to be aggregated, the employer may deduct the amount of the earnings-related contributions based on those [F1 general earnings], which are payable by the employee, either wholly from one such payment or partly from one and partly from the other or any one or more of the others.

[F4 (3) If the employer–

(a) on making any payment of [F1 general earnings] to an employee does not deduct from those [F1 general earnings] the full section 6(4)(a) amount, or

(b) is treated as making a payment of [F1 general earnings] by paragraph 4A,

he may recover, in a case falling within paragraph (a) the amount not so deducted or, in a case falling within paragraph (b) the section 6(4)(a) amount, by deduction from any subsequent payment of [F1 general earnings] made by the employer to that employee during [F5 the same year and, where the case falls within paragraph (b) [F6 or sub-paragraph 4(a) or (f)]].

• This sub-paragraph is subject to sub-paragraphs (4) and (5).]

[F7 (3A) Where an amount has been treated as retrospective earnings paid to or for the benefit of an employee, the employer may deduct the retrospective contributions based on those earnings from any payment of general earnings made by him to that employee—

(a) after the relevant retrospective contributions regulations come into force, and

(b) during the same and the following year.

This sub-paragraph is subject to sub-paragraph (5).]

(4) Sub-paragraph (3) applies only where—

(a) the under-deduction occurred by reason of an error made by the employer in good faith;

(b) the [F1 general earnings] in respect of which the under-deduction occurred are treated as earnings by virtue of regulations made under section 112 of the Act (certain sums to be earnings)F8 ;

(c) the under-deduction occurred as a result of the cancellation, variation or surrender of the contracting-out certificate issued in respect of the employment in respect of which the payment of [F1 general earnings] is made; or

(d) the [F1 general earnings] in respect of which the under-deduction occurred are, by virtue of regulation 23, not paid through the secondary contributor in relation to the employment; F9 ...

[F10 (e) the employer is treated as making a payment of [F1 general earnings] by paragraph 4A][F11 ; or]

[F12 (f) the payment in question is made to a person whose place of employment is outside the United Kingdom and on whose general earnings Class 1 contributions are, but income tax is not, payable.]

(5) For the purposes of sub-paragraphs (3), [F13 (3A),] (4), (8) and (11)—

(a) the amount which by virtue of those sub-paragraphs may be deducted from any payment, or from any payments which fall to be aggregated, shall be an amount in addition to, but not in excess of, the amount deductible from those payments under the other provisions of this Schedule; and

(b) for the purposes of Part III of this Schedule an additional amount which may be deducted by virtue of those sub-paragraphs [F14 in a case falling within paragraph (a) of any of those sub-paragraphs [F15 except sub-paragraph (3A)]] shall be treated as an amount deductible under this Schedule only in so far as the amount of the corresponding under-deduction has not been so treated.

[F16 This is subject to the following qualification.]

[F17 (5A) Where a payment—

(a) falls within sub-paragraph (4)(e) [F18 or (f)],

(b) comprises a beneficial interest in [F19 securities], or

(c) is treated as earnings within the meaning of Part 7 of the Income Tax (Earnings and Pensions) Act 2003,

sub-paragraph (5B) applies.

(5B) If this sub-paragraph applies—

(a) sub-paragraph (5)(a) shall have effect as if “, but not in excess of,” were omitted; and

(b) sub-paragraph (8) shall have effect as if at the end there were added “or the following year”]

(6) Sub-paragraph (8) applies where an employer makes a payment consisting either soley of non-monetary earnings, or a combination of monetary and non-monetary earnings, to—

(a) an employee;

(b) an ex-employee,

and at the time of the payment of those earnings there are no, or insufficient, monetary earnings from which the employer could deduct the [F20 section 6(4)(a) amount].

(7) In sub-paragraph (6)(b) “ex-employee” means a person who—

(a) ceases to be employed by the employer in a particular year (“the cessation year”); and

(b) receives such earnings from the employer after the cessation of employment but in the cessation year.

[F21 (8) Where, in the circumstances specified in sub-paragraph (6), the employer–

(a) does not deduct from the earnings referred to in that sub-paragraph the full section 6(4)(a) amount, or

(b) is treated as making a payment of [F1 general earnings] by paragraph 4A,

he may recover, in a case falling within paragraph (a) the amount not so deducted or, in a case falling within paragraph (b) the section 6(4)(a) amount, by deduction from any subsequent payment of monetary earnings to that employee, or ex-employee (as the case may be) during the same year.

• This sub-paragraph is subject to sub-paragraph (5).]

(9) Sub-paragraph (11) applies if—

(a) a person (“the ex-employee”) ceases in a particular tax year (“the cessation year”) to be employed by a particular employer (“the employer”); and

(b) the ex-employee receives from the employer in the cessation year, after the cessation of employment, earnings in the form of—

(i) a beneficial interest in [F22 securities],

(ii) a conditional interest in [F22 securities] or a beneficial interest in convertible [F22 securities] treated as earnings under [F23 regulation 22(5), (6) or (7)] ,

(iii) any gain on which the ex-employee is chargeable to tax by virtue of [F24 section 4(4)(a) of the Act]; and

(c) at the time of the payment of those earnings there are no monetary earnings, or insufficient monetary earnings, from which the employer could deduct the [F25 section 6(4)(a) amount].

F26 (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F27 ...

•    

(11) Where, in the circumstances specified in sub-paragraph (9), the employer has not deducted, from the earnings referred to in sub-paragraph (9)(b), the full amount of earnings-related contributions which by virtue of this Schedule he is entitled to deduct, he may, without prejudice to sub-paragraph (8) but subject to sub-paragraph (12)(b), recover the amount so under-deducted by deduction from the proceeds of sale of some, or all, of—

(a) the [F28 securities] referred to in of sub-paragraph 9(b)(i) and (ii); or

(b) the [F28 securities] which form the subject matter of the option referred to in sub-paragraph (9)(b)(iii).

(12) For the purposes of sub-paragraph (11)—

(a) the whole of the amount under-deducted may be recovered from the proceeds of sale of some, or all, of the [F28 securities] referred to in that sub-paragraph; and

(b) the employee’s prior written consent to that sale and the recovery of all or part of the under-deduction from the proceeds thereof, shall be required.

(13) Subject to sub-paragraph (14), the employer shall record on the deductions working sheet for that employee the name and national insurance number of the employee, the year to which the working sheet relates, the appropriate category letter in relation to the employee (being the appropriate category letter indicated by the Board) and, in so far as relevant to that category letter, the following particulars regarding every payment of [F1 general earnings] which he makes to the employee namely—

(a) the date of payment;

(b) the amount of—

(i) earnings up to and including the current lower earnings limit where earnings equal or exceed that figure,

(ii) earnings which exceed the current lower earnings limit but do not exceed the current primary threshold and the current secondary threshold,

(iii) earnings which exceed the current primary threshold and the current secondary threshold but do not exceed the [F29 upper accrual point],

[F30 (iiia) earnings which exceed the upper accrual point but do not exceed the current upper earnings limit,]

[F31 (iv) the sum of the primary Class 1 contributions and secondary Class 1 contributions payable on all the employee’s earnings, other than contributions recovered under sub-paragraph (3); and

(v) the primary Class 1 contributions payable on the employee’s earnings;]

(vi) any statutory maternity pay;

[F32 (vii) any statutory paternity pay; and

(viii) any statutory adoption pay.

The amounts to be recorded under sub-paragraphs (iv) and (v) are the amounts of contributions after deducting the amount of any reduction calculated in accordance with section 41(1) to (1B) or section 42A(1) to (2A) of the Pensions Act (“the reduction”), subject to the following qualification.

If the amount of the reduction exceeds the amount of the contributions in respect of which it falls to be made, the amount to be entered under sub-paragraph (v) is nil.]

F33 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14) Where 2 or more payments of [F1 general earnings] fall to be aggregated, the employer, instead of recording under heads (iv) and (v) of sub-paragraph (13)(b) separate amounts in respect of each such payment, shall under each head record a single amount, being the total of the contributions appropriate to the description specified in that head, in respect of the aggregated payments.

(15) When an employer pays [F1 general earnings] he shall record under the name of the employee to whom he pays the [F1 general earnings]—

(a) the date of payment;

(b) the amount of the [F1 general earnings], excluding any allowable [F34 pension] contributions; and

(c) any allowable [F34 pension] contributions;

and retain the record for a period of three years after the end of the tax year in which the [F1 general earnings] were paid.

Textual Amendments

F1 Words in Sch. 4 para. 7 substituted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(a)

F2 Word in Sch. 4 para. 7(1) omitted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(2)

F3 Words in Sch. 4 para. 7(1) inserted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(2)

F4 Sch. 4 para. 7(3) substituted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(3)

F5 Words in Sch. 4 para. 7(3) substituted (10.6.2003) by The Social Security (Contributions) (Amendment No. 4) Regulations 2003 (S.I. 2003/1337), regs. 1(1), 2(2)

F6 Words in Sch. 4 para. 7(3) inserted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(b)

F7 Sch. 4 para. 7(3A) inserted (6.4.2007) by The Social Security Contributions (Consequential Provisions) Regulations 2007 (S.I. 2007/1056), regs. 1, 8(4)(a)

F8 Section 112 was amended by paragraph 51(4) of Schedule 1 to the Employment Rights Act 1996 (c. 18) and paragraph 21 of Schedule 3 to the Transfer Act.

F9 Word in Sch. 4 para. 7(4)(d) omitted (6.4.2004) by virtue of The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(c)(i)

F10 Sch. 4 para. 7(4)(e) and word inserted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(4)

F11 Word in sch. 4 para. 7(4)(e) inserted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(ii)

F12 Sch. 4 para. 7(4)(f) and word inserted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(c)(ii)

F13 Word in Sch. 4 para. 7(5) inserted (6.4.2007) by The Social Security Contributions (Consequential Provisions) Regulations 2007 (S.I. 2007/1056), regs. 1, 8(4)(b)(i)

F14 Words in Sch. 4 para. 7(5)(b) inserted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(5)

F15 Words in Sch. 4 para. 7(5)(b) inserted (6.4.2007) by The Social Security Contributions (Consequential Provisions) Regulations 2007 (S.I. 2007/1056), regs. 1, 8(4)(b)(ii)

F16 Words in Sch. 4 para. 7(5) added (10.6.2003) by The Social Security (Contributions) (Amendment No. 4) Regulations 2003 (S.I. 2003/1337), regs. 1(1), 2(3)

F17 Sch. 4 para. 7(5A)-(5B) inserted (10.6.2003) by The Social Security (Contributions) (Amendment No. 4) Regulations 2003 (S.I. 2003/1337), regs. 1(1), 2(4)

F18 Words in Sch. 4 para. 7(5A)(a) added (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(d)

F19 Word in Sch. 4 para. 7(5A)(b) substituted (1.9.2003) by The Social Security (Contributions) (Amendment No. 5) Regulations 2003 (S.I. 2003/2085), regs. 1, 14(2)

F20 Words in Sch. 4 para. 7(6) substituted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(6)

F21 Sch. 4 para. 7(8) substituted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(7)

F22 Word in Sch. 4 para. 7(9)(b) substituted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(e)(i)

F23 Words in Sch. 4 para. 7(9)(b)(ii) substituted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(e)(ii)

F24 Words in Sch. 4 para. 7(9)(b)(iii) substituted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(e)(iii)

F25 Words in Sch. 4 para. 7(9)(c) substituted (28.11.2002) by The Social Security (Contributions)(Amendment No. 5) Regulations 2002 (S.I. 2002/2929), regs. 1, 7(8)

F26 Sch. 4 para. 7(10) omitted (6.4.2004) by virtue of The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(f)

F27 Sch. 4 para. 7(10) revoked (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 36, Sch. 1

F28 Word in Sch. 4 para. 7(11)(12) substituted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(g)

F29 Words in Sch. 4 para. 7(13)(b)(iii) substituted (6.4.2009) by The Social Security (Contributions) (Amendment) Regulations 2009 (S.I. 2009/111), regs. 1, 4(2)(a)

F30 Sch. 4 para. 7(13)(b), (iiia) inserted (6.4.2009) by The Social Security (Contributions) (Amendment) Regulations 2009 (S.I. 2009/111), regs. 1, 4(2)(b)

F31 Sch. 4 para. 7(13)(b)(iv)-(v) substituted (with effect in accordance with reg. 1(1) of the amending S.I.) by The Social Security (Contributions) (Amendment) Regulations 2003 (S.I. 2003/193), regs. 1(1), 16(2)(a)(i)

F32 Sch. 4 para. 7(13)(b)(vii)-(viii) and words inserted (with effect in accordance with reg. 1(1) of the amending S.I.) by The Social Security (Contributions) (Amendment) Regulations 2003 (S.I. 2003/193), regs. 1(1), 16(2)(a)(ii)

F33 Sch. 4 para. 7(13)(c) omitted (with effect in accordance with reg. 1(1) of the amending S.I.) by virtue of The Social Security (Contributions) (Amendment) Regulations 2003 (S.I. 2003/193), regs. 1(1), 16(2)(b)

F34 Word in Sch. 4 para. 7(15) substituted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 31(3)(h)