The Social Security (Contributions) (Amendment No. 3) Regulations 2011

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Social Security (Contributions) Regulations 2001 (“the 2001 Regulations”). They come into force on 6th April 2011.

Part 2 concerns the repayment of Class 1A National Insurance Contributions (NICs). Regulation 3 inserts a new regulation 55A into the 2001 Regulations. Regulation 55A provides for repayment of a Class 1A NICs which were paid on an amount treated as earnings which is now exempt from income tax by virtue of the provisions at sections 100A and 100B of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”). Those provisions in ITEPA introduced an exemption from income tax in respect of benefits in kind provided for certain employees and office holders in the form of qualifying overseas holiday homes. The income tax exemption is treated as always having had effect. Regulation 55A provides for the repayment of Class 1A NICs where an officer of Revenue and Customs is satisfied that the contribution was paid on the same amount treated as earnings as is now exempt under the ITEPA provisions subject to the condition that an application is made in writing to HMRC on or before 6th April 2015.

Regulations 4 and 5 make consequential amendments to regulations 51 and 57 of the 2001 Regulations. Regulation 57 is also amended to include a cross reference to regulation 55, to clarify the existing position that regulation 57 is subject to regulation 55.

A full impact assessment has not been produced for this Part of the instrument as no impact is foreseen on the private or voluntary sectors.

Part 3 concerns the payment of Class 2 and Class 3 NICs.

Regulations 89 and 90 of the 2001 Regulations set out the time for payment of Class 2 and Class 3 NICs.

Regulation 6 of these Regulations amends regulation 89 in relation to those who are liable or entitled to pay Class 2 NICs. They have effect in relation to Class 2 NICs in respect of contribution weeks beginning on or after 10th April 2011.

HMRC currently send individuals who are liable, or entitled, to pay Class 2 NICs and who do not pay by direct debit a quarterly notice informing them of the amount they are liable, or entitled, to pay. Such notices will now be sent on a biannual basis.

Those liable to pay Class 2 NICs in relation to “biannual contribution periods” (as defined in the new regulation 89(7)) will be required to pay those contributions on the dates specified in the new regulation 89(2) or, where the individual informs HMRC that no notice has been received, the date specified in a notice sent to the individual by HMRC in accordance with paragraph 89(4). Those entitled, but not liable, to pay Class 2 Contributions will be entitled to pay such contributions in accordance with new regulation 89(2A).

A full Impact Assessment of the effect that this Part of the instrument will have on the costs of business and the voluntary sector is available from the HMRC website at http://www.hmrc.gov.uk/better-regulation/ia.htm

Part 4 concerns subsistence allowances paid to experts seconded to a body of the European Union.

Regulation 7 adds a new paragraph 15A to Part 8 of Schedule 3 to the 2001 Regulations. The new paragraph 15A provides that payments of subsistence allowances paid by specified bodies of the European Union located in the United Kingdom are to be disregarded in the calculation of earnings for National Insurance purposes. The payments are those made to persons who are seconded to a specified body because of their expertise in matters relating to the subject matter of the functions of the body.

A full and final Impact Assessment has not been produced for this Part of the instrument as a negligible impact on the private or voluntary sectors is foreseen.