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United Kingdom Statutory Instruments


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2003 No. 2085

SOCIAL SECURITY

The Social Security (Contributions) (Amendment No. 5) Regulations 2003

  Made 11th August 2003 
  Laid before Parliament 11th August 2003 
  Coming into force 1st September 2003 

The Treasury, with the concurrence of the Secretary of State, in exercise of the powers conferred upon them by sections 3(2), 4(6) and (7), 10(9) and 175(3) of the Social Security Contributions and Benefits Act 1992[1] and, with the concurrence of the Department for Social Development, in exercise of the powers conferred upon them by sections 3(2), 4(6) and (7), 10(9) and 171(3) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992[2], and the Commissioners of Inland Revenue in exercise of the powers conferred upon them by paragraph 6(1) of Schedule 1 to each of those Acts[3], make the following Regulations:

Citation and commencement
     1. These Regulations may be cited as the Social Security (Contributions) (Amendment No. 5) Regulations 2003 and shall come into force on 1st September 2003.

Interpretation
    
2. In these Regulations "the principal Regulations" means the Social Security (Contributions) Regulations 2001[4].

Amendment of the principal Regulations
     3. The principal Regulations are amended as follows.

    
4. In regulation 1(2) (interpretation) - 

     5.  - (1) Amend regulation 22 (payment to be treated as earnings)[8] as follows.

    (2) In the heading for "Payment" substitute "Amounts".

    (3) In paragraph (1) for "(2) to (5)" substitute "(2) to (8)".

    (4) For paragraphs (3) to (5) substitute - 

     6.  - (1) Amend regulation 40 (prescribed emoluments in respect of which Class 1A contributions not payable)[13] as follows.

    (2) In the heading, and in paragraph (1), for "emoluments" substitute "general earnings"[14].

    (3) In each of paragraphs (2) to (6) for "emoluments" - 

    (4) For paragraph (4)(b) substitute - 

    (5) Omit paragraph (6)(a).

    (6) After paragraph (6) insert - 

    (7) In paragraph (7)[15] - 

    (8) In paragraph (8) omit the definition of "emolument".

     7.  - (1) Amend Schedule 2 (calculation of earnings for the purposes of earnings-related contributions in particular cases) as follows.

    (2) In paragraph 5 for "the amount of income likely to be chargeable to tax under Schedule E", in each place where it occurs, substitute "the amount of general earnings".

    (3) For paragraph 7 and the heading preceding it substitute - 

    (4) Omit paragraphs 8 to 10.

    (5) For paragraph 11 and the heading preceding it substitute - 

    (6) In paragraph 11A(2) after "paragraph 16" insert "or 16A".

    (7) Omit paragraph 12.

     8. Amend Schedule 3 (payments to be disregarded in the calculation of earnings for the purposes of earnings-related contributions) in accordance with regulations 9 to 13.

    
9. In Part 1 (introductory), in paragraph 1(5)(d), for "share incentives" substitute "incentives by way of securities".

    
10.  - (1) Amend Part 3 (payments by way of readily convertible assets which are not disregarded as payments in kind) as follows.

    (2) For paragraphs 1 and 2 substitute - 

     11. In Part 4 (payments by way of specific assets not disregarded as payments in kind) - 

     12.  - (1) Amend Part 9 as follows.

    (2) For the heading substitute - 

    (3) For paragraph 1 and the heading preceding it substitute - 

    (4) Omit paragraph 2.

    (5) For paragraph 3 (rights to acquire shares) and the heading preceding it substitute - 

    (6) Omit paragraphs 3A[20] and 4.

    (7) For paragraph 5 and the heading preceding it substitute - 

    (8) In paragraph 6 for "paragraph 34 of Schedule 8 to the Finance Act 2000." substitute "paragraph 44 of Schedule 2 to ITEPA 2003.".

    (9) For paragraph 7 and the heading preceding it substitute - 

    (10) Omit paragraph 8.

    (11) For paragraph 9 and the heading preceding it substitute - 

    (12) Omit paragraphs 10 to 15.

    (13) For paragraph 16 and the heading preceding it substitute - 

    (14) In paragraph 17 - 

     13. In Part 10 (miscellaneous and supplemental)[24] - 

     14.  - (1) Amend Schedule 4 (provisions derived from the Income Tax Acts and the Income Tax (Employments) Regulations 1993) as follows.

    (2) In paragraph 7(5A)(b) [
25] for "shares" substitute "securities".

    (3) In the heading preceding paragraph 23(additional return by employer at end of year where liability transferred to employed earner: share option gains) for "share option gains" substitute "gains from securities options".

    (4) In paragraph 23(2) for "92 days" substitute "7th July".


Jim Murphy

Joan Ryan
Two of the Lords Commissioners of Her Majesty's Treasury

11th August 2003



The Secretary of State concurs.



Signed by authority of the Secretary of State


Malcolm Wicks
Parliamentary Under-Secretary of State, Department for Work and Pensions


The Department for Social Development concurs.



Sealed with the Official Seal of the Department for Social Development on


31st July 2003.

L.S.


John O'Neill
Senior Officer of the Department for Social Development

Nick Montagu

Helen Ghosh
Two of the Commissioners of Inland Revenue

6th August 2003



EXPLANATORY NOTE

(This note is not part of the Regulations)


These Regulations amend the Social Security (Contributions) Regulations 2001 (S.I. 2001/1004: "the principal Regulations"), mainly in consequence of changes to the taxation of share-based earnings introduced by Schedule 22 to the Finance Act 2003 (c. 14) and the rewriting of the law on income tax by the Income Tax (Earnings and Pensions) Act 2003 (c. 1: "ITEPA 2003").

Regulation 1 provides for the citation and commencement of the Regulations, and regulation 2 for interpretation.

Regulation 3 introduces the amendments to the principal Regulations.

Regulation 4 amends regulation 1(2) of the principal Regulations by amending, inserting or deleting definitions consequent on the following amendments.

Regulation 5 amends regulation 22 of the principal Regulations by substituting new paragraphs (paragraphs (5) to (8)) for the existing paragraphs (3) and (4) to reflect changes made to the provisions on the taxation of share-based income in ITEPA 2003 by the Finance Act 2003. It also amends regulation 22 to treat as earnings sums on which an employee is taxable under section 222 of ITEPA 2003 (the new regulation 22(4)), and re-enacts the original regulation 22(5) as regulation 22(3).

Regulation 6 amends regulation 40 of the principal Regulations by substituting references to "general earnings" for references to "emoluments". The expression "general earnings" is defined in section 122(1) of the Social Security Contributions and Benefits Act 1992 (c. 4) and section 121(1) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7), having been inserted by ITEPA 2003 (see paragraphs 178 and 199 of Schedule 6 to ITEPA 2003). It also omits, from regulation 40(7), references to a series of Extra Statutory Concessions which were replaced by statutory disregards from general earnings by ITEPA 2003 (and accordingly fell outside the scope of Class 1A contributions). It also restructures the original paragraph (6) of regulation 40 in the light of the different approach taken to the taxation of contributions to retirement benefit schemes by ITEPA 2003.

Regulation 7 amends Schedule 2 to the principal Regulations to reflect changes made to the income tax charges on share-based earnings by Schedule 22 to the Finance Act 2003 and the abolition, by ITEPA, of Schedule E, formerly set out in section 19 of the Income and Corporation Taxes Act 1988 (c. 1: "the Taxes Act").

Regulations 8 to 13 amend Schedule 3 to the principal Regulations.

Regulation 8 introduces the amendments.

Regulations 9 and 11 amend Parts 1 and 4 respectively of the Schedule consequent upon the changes made to Part 9 by regulation 12. Regulation 10 amends paragraph 2 of Part 3 of the Schedule to reflect the re-enactment of section 203FB of the Taxes Act as section 697 of ITEPA 2003.

Regulation 12 makes amendments to Part 9 which mirror the new treatment of share-based income for income tax purposes introduced by Schedule 22.

Regulation 13 amends Part 10 to provide a disregard in respect of any amount actually paid by an employer in respect of the income tax liability.

Regulation 14 makes amendments to Schedule 4 to the principal Regulations consequent on the changes in the taxation of share-based earnings for income tax purposes.


Notes:

[1] 1992 c. 4 ("the 1992 Act"). Relevant amendments to section 3 were made by paragraph 3 of Schedule 3 to the Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2: "the Transfer Act"). Relevant amendments to section 4 were made by section 50(2) of the Social Security Act 1998 (c. 14: "the 1998 Act"), paragraph 4 of Schedule 3 to the Transfer Act, section 74(3) of the Child Support, Pensions and Social Security Act 2000 (c. 19: "the 2000 Act"), paragraph 172(4) of Schedule 6 to the Income Tax (Earnings and Pensions) Act 2003 (c. 1: "ITEPA 2003"). Section 10 was substituted by section 74(2) of the 2000 Act: the relevant amendment is that made by paragraph 174(12) of Schedule 6 to ITEPA 2003.back

[2] 1992 c. 7 ("the 1992 Northern Ireland Act"). Relevant amendments to section 3 were made by paragraph 4 of Schedule 3 to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999 (S.I. 1999/671: "the Transfer Order"). Relevant amendments to section 4 were made by Article 47(2) of the Social Security (Northern Ireland) Order 1998 (S.I 1998/1506 (N.I. 10): "the 1998 Order"), paragraph 5 of Schedule 3 to the Transfer Order, section 78(3) of the 2000 Act and paragraph 193(4) of Schedule 6 to ITEPA 2003. Section 10 was substituted by section 78(2) of the 2000 Act: the relevant amendment is that made by paragraph 195(12) of Schedule 6 to ITEPA 2003. The functions of the Department of Health and Social Services for Northern Ireland under the 1992 Northern Ireland Act were transferred to the Department for Social Development by Article 8(b) of, and Part II of Schedule 6 to, the Departments (Transfer and Assignment of Functions) Order (Northern Ireland) 1999 (S.R. 1999 No. 481).back

[3] Paragraph 6 of Schedule 1 to the 1992 Act was amended by paragraph 77(8) of Schedule 7 to the 1998 Act, paragraph 35(2) of Schedule 3 to the Transfer Act and paragraph 185 of Schedule 6 to ITEPA 2003. Paragraph 6 of Schedule 1 to the 1992 Northern Ireland Act was amended by paragraph 58(8) of Schedule 6 to the 1998 Order, paragraph 34(2) of Schedule 3 to the Transfer Order and paragraph 204 of Schedule 6 to ITEPA 2003.back

[4] S.I. 2001/1004: relevant amendments are made by S.I. 2001/2412, 2002/307 and 2003/1059 and 1337. Regulation 156(3) provides a rule of construction in relation to Northern Ireland for references in the principal Regulations to enactments applying only to Great Britain.back

[5] Section 702 is amended by paragraph 15 of Schedule 22 to the Finance Act 2003 (c. 14). Schedule 22 to that Act is referred below as "Schedule 22".The definition of "ITEPA 2003" was inserted into section 122(1) of the 1992 Act by paragraph 178, and into section 121(1) of the 1992 Northern Ireland Act by paragraph 199, of Schedule 6 to ITEPA 2003.back

[6] Sections 423 and 424 are substituted by paragraph 3(1) of Schedule 22.back

[7] Section 420 is substituted by paragraph 2(1) of Schedule 22.back

[8] Regulation 22 was amended by regulation 4 of S.I. 2002/307.back

[9] Section 222 was amended by section 144 of the Finance Act 2003.back

[10] Section 428 is substituted by paragraph 3(1) of Schedule 22, subject to the saving contained in paragraph 3(2) of that Schedule in relation to securities and interests in securities acquired before 16th April 2003.back

[11] Section 421B was inserted by paragraph 2(1) of Schedule 22.back

[12] Section 698 is substituted by paragraph 12(1) of Schedule 22, subject to the saving in sub-paragraph (2) of that paragraph.back

[13] Regulation 40 was amended by regulation 3 of S.I. 2001/2412.back

[14] A definition of "general earnings" was inserted into section 122(1) of the 1992 Act and section 121(1) of the 1992 Northern Ireland Act by the provisions noted in footnote (a) on page 2.back

[15] Sub-paragraph (a) was omitted by regulation 3 of S.I. 2001/2412.back

[16] See paragraphs 2 to 10 of Schedule 22.back

[17] Paragraph 16A is inserted by regulation 12(13) of this instrument as part of the substitution for the former paragraph 16.back

[18] Paragraph 11A was inserted by regulation 3 of S.I. 2003/1059.back

[19] Subsections (5A) to (5D) were inserted, and subsection (6) amended, by paragraph 15(2) and (3) of Schedule 22.back

[20] Paragraph 3A was inserted by regulation 5 of S.I. 2001/2412.back

[21] Section 471(5) is substituted by paragraph 10(1) of Schedule 22.back

[22] Section 425 is substituted by paragraph 3(1) of Schedule 22.back

[23] Paragraph 17 was inserted by regulation 4 of S.I. 2003/1059.back

[24] Part 10 was amended by S.I. 2001/2412 and 2002/2924.back

[25] Sub-paragraph (5A) was inserted by regulation 2(4) of S.I. 2003/1337.back



ISBN 0 11 047323 X


  Prepared 18 August 2003


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