The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004

Made: 16th March 2004

Laid before Parliament: 16th March 2004

Coming into force: 6th April 2004

The Treasury, in exercise of the powers conferred upon them by sections 2(2) and (2A), 3(2), (2A) and (3), 4(6) and (7), 4A, 10(8) and (9), 10A(7), 19(1), (2)(b) and (5A), 122(1) and 175(3) and (4) of, and paragraphs 7B and 8(1)(ia) and (1A) of Schedule 1 to the Social Security Contributions and Benefits Act 1992 (“the 1992 Act”) with the concurrence of the Secretary of State insofar as required and sections 2(2) and (2A), 3(2), (2A) and (3), 4(6) and (7), 4A, 10(8) and (9), 10A(7), 18(1), 19(1), (2)(b) and (5A),121(1) and 171(3), (4) and (10) of, and paragraphs 7B and 8(1)(ia) and (1A) of Schedule 1 to, the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (“the 1992 Northern Ireland Act”), with the concurrence of the Department for Social Development insofar as required , and the Commissioners of Inland Revenue in exercise of the powers conferred upon them by sections 18(1), 175(3) and (4) of, and paragraphs 3(1), (3) and (6) and 6(1) of Schedule 1 to the 1992 Act and sections 18(1), 171(3) and (4) of, and paragraphs 3(1), (3) and (6) and 6(1) of Schedule 1 to the 1992 Northern Ireland Act hereby make the following Regulations:

Citation, commencement, effect and interpretation

1

• (1) These Regulations may be cited as the Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 and shall come into force on 6th April 2004.

• (2) The substitution by regulation 12 of regulations 52 and 52A of the Contributions Regulations for the former regulation 52, and the consequential amendments made to those Regulations by regulations 11, 14, 26 and 32(11) of these Regulations have effect only in respect of contributions payable in respect of the year 2003-04 and subsequent years.

• (3) In these Regulations—

• “the Categorisation Regulations” means the Social Security (Categorisation of Earners) Regulations 1978 and “the Northern Ireland Categorisation Regulations” means the Social Security (Categorisation of Earners) Regulations (Northern Ireland) 1978 ;

• “the Contributions Regulations” means the Social Security (Contributions) Regulations 2001 ; and

• “the Intermediaries Regulations” means the Social Security Contributions (Intermediaries) Regulations 2000 and “the Northern Ireland Intermediaries Regulations” means the Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000 .

Amendment of the Contributions Regulations

2

The Contributions Regulations shall be amended as follows.

3

In regulation 1(2) (interpretation)—

• (a) after the definition of “apportionment” insert—

“approved method of electronic communications” in relation to the delivery of information or the making of a payment in accordance with a provision of these Regulations, means a method of electronic communications which has been approved, by specific or general directions issued by the Board, for the delivery of information of that kind or the making of a payment of that kind under that provision;

• (b) for the definition of “business travel” substitute—

“business travel” has the meaning given in section 236(1) of ITEPA 2003 ;

• (c) for the definition of “cash voucher” substitute—

“cash voucher” has the meaning given to it in section 75 of ITEPA 2003;

• (d) in the definition of “conditional interest in shares”, for the words from “sections” to the end substitute “ Chapter 2 of Part 7 of ITEPA 2003 as originally enacted ; ”.

• (e) omit the definitions of “income tax month” and “month”;

• (f) for the definition of “non-cash voucher” substitute—

“non-cash voucher” has the meaning given to it in section 84 of ITEPA 2003;

• (g) after the definition of “non-contracted out rate” insert—

“official computer system” means a computer system maintained by or on behalf of the Board; “the PAYE Regulations” means the Income Tax (Pay As You Earn) Regulations 2003 ;

• (h) omit the definition of “Schedule E”; and

• (i) after the definition of “the Taxes Act” insert—

“tax month” has the meaning given in paragraph 1(2) of Schedule 4;

4

In regulation 22A (amounts to be treated as earnings in connection with the use of qualifying vehicles other than cycles) —

• (a) in paragraph (3)—

• (i) for “section 197AD(2) of the Taxes Act” substitute “ section 229(2) of ITEPA 2003 ”; and

• (ii) for the words from “Here “qualifying vehicle”” to “the Taxes Act,” substitute —

Here “qualifying vehicle” means a vehicle to which section 235 of ITEPA 2003 applies,

and

• (b) in paragraph (4) for “paragraph 4(2) of Schedule 12AA to the Taxes Act” substitute “ section 230(2) of ITEPA 2003 ”.

5

In regulation 27(5)(a) (payments to directors which are to be disregarded)—

• (a) omit “and (2)”; and

• (b) at the end add “ and Part 2 of Schedule 1 to ITEPA 2003 ”.

6

Omit regulations 32 to 35.

7

In regulation 36 (reduction of Class 1A contribution in respect of things provided in connection with two or more employments or to two or more earners)—

• (a) in paragraph (1) for “to which Chapter II of Part V of the Taxes Act applies” substitute “ other than excluded employments within the meaning of the benefits code (see Chapter 2 of Part 3 of ITEPA 2003) ”; and

• (b) in paragraph (2) omit “(or, where regulation 35 applies, shall be further reduced)”.

8

Omit regulation 37.

9

In regulation 40 (prescribed general earnings in respect of which Class 1A contributions are not payable)—

• (a) in paragraph (2)(c) for “2 to 7” substitute “ 3 to 7A ”;

• (b) in paragraph (6)(c) after “(superannuation funds approved before 6th April 1980)” insert “ or sections 590 (annuities) and 591 (taxable pension income) ”;

• (c) in paragraph (8)(a) for “Part X” substitute “ Part 10 or 10A ”.

10

In regulation 42(1) (exception from liability to pay Class 1B contributions)—

• (a) in sub-paragraph (a) for “of the chargeable emoluments” substitute “ general earnings which are chargeable emoluments ”; and

• (b) in sub-paragraph (b) for “emoluments” substitute “ general earnings ”.

11

In regulation 51(2) (disposal of contributions not properly paid) for “regulation 52(1)” substitute “ regulation 52 or 52A ”.

12

For regulation 52 substitute—

(52) (1) This regulation applies if a contribution other than a Class 4 contribution has been paid in error. This regulation is subject to regulations 51 and 57. (2) If this regulation applies, an application may be made to the Board for the return of the contribution paid in error. (3) An application under paragraph (2) shall be made to the Board— (a) in writing, or in such form and by such means of electronic communications as are approved; and (b) within the time permitted by paragraph (8). (4) On the making of an application under paragraph (2) the Board shall return the contribution paid in error. This is subject to paragraphs (5) and (6). (5) Paragraph (4) does not require the return of contributions unless the amount to be returned exceeds— (a) in the case of Class 1 contributions, 1/15 of a contribution at the main primary percentage payable on earnings at the upper earnings limit in respect of primary Class 1 contributions prescribed in regulation 10 for the last or only year in respect of which the contributions were paid; or (b) in the case of a Class 1A or Class 1B contribution, 50 pence. (6) Paragraph (4) does not require the return of a primary Class 1 contribution which is treated as properly paid by regulation 3 of the Social Security (Additional Pension) (Contributions Paid in Error) Regulations 1996 . (7) Contributions paid by a secondary contributor on behalf of any person in error— (a) if they are not recovered from that person by the secondary contributor, may be returned to the secondary contributor; and (b) if they are recovered by the secondary contributor from that person may be returned— (i) to that person; or (ii) with that person’s consent given in writing or in such form and by such means of electronic communications as may be approved, to the secondary contributor. (8) An application for the return of any contribution paid in error shall be made within the period of six years from the end of the year in which the contribution was due to be paid. This is subject to the following qualification. If the application is made after the end of that period, an officer of the Board shall admit it if satisfied that— (a) the person making the application had reasonable excuse for not making the application within that period; and (b) the application was made without unreasonable delay after the excuse had ceased. (9) In this regulation “error” means, and means only, an error which— (a) is made at the time of the payment; and (b) relates to some past or present matter. (52A) (1) This regulation applies if there has been a payment of contributions in excess of the maximum determined in accordance with regulation 21 (annual maxima for those with more than one employment) in the particular case. This regulation is subject to regulations 51, 52 and 57. (2) If this regulation applies, an application may be made to the Board, in writing or in such form and by such means of electronic communications as may be approved for the return of so much of the payment of contributions as exceeds the maximum determined in accordance with regulation 21 in the particular case. (3) On the making of an application under paragraph (2) the Board shall, subject to the following provisions of this regulation, return so much of the payment of contributions as exceeds the maximum determined in accordance with regulation 21 in the particular case. (4) Paragraph (3) does not require the return of— (a) a payment of Class 1 or Class 2 contributions unless the amount to be returned exceeds 1/15 of a contribution at the primary percentage payable on earnings at the upper-earnings limit in respect of main primary Class 1 contributions prescribed in regulation 10 for the last or only year in respect of which the contributions were paid; (b) a primary Class 1 contribution to which regulation 3 of the Social Security (Additional Pension) (Contributions Paid in Error) Regulations 1996 (purposes for which primary Class 1 contributions paid in error are to be treated as properly paid) applies. (5) Contributions to which this regulation applies shall be returned in the following order— (a) primary Class 1 contributions at the reduced rate; (b) Class 2 contributions; (c) primary Class 1 contributions at the main primary percentage; (d) any amount of primary Class 1 contributions reduced in accordance with section 41(1) and (1A) of the Pensions Act in respect of COSRS employment; (e) any amount of primary Class 1 contributions reduced in accordance with section 42A(1) and (2) of the Pensions Act in respect of COMPS employment. (6) The amount to be refunded is determined in accordance with the following Rules. In this paragraph— - “a valid personal pension notice” means a notice given under subsection (1) of section 44 of the Pensions Act (approved personal pension arrangements) which has not been rejected by the Board; - “an APP employment” means an employment in respect of which a valid personal pension notice has been given; and - “UEL” means the upper earnings limit for the year in respect of which the contributions were due to be paid and “PT” means the primary threshold for that year. Rule 1 applies where none of the employments is contracted-out. Rule 2 applies where at least one employment is contracted-out and no valid personal pension notice has been given in respect of another employment. Rule 3 applies where at least one of the employments is contracted-out and a valid personal pension notice has been given in respect of another employment. The amount to be returned is the excess of the contributions actually paid by the earner over the maximum prescribed by regulation 21 in the particular case. If the amount of contributions paid in respect of contracted-out employments exceed the amount found by the following formula, the amount to be returned is the excess. The formula is— 53 × (UEL – PT) × 9.4%. In any other case to which this Rule applies take the following Steps: the amount to be returned is the excess of the contributions actually paid by the earner over the amount found by Step 5 in the following sequence. Determine the amount of earnings between PT and UEL in respect of contracted-out employments held in the year. Multiply the amount found by Step 1 by 9.4%. Subtract the amount found by Step 1 from that found by the formula— 53 × (UEL – PT). Multiply the result produced by Step 3 by 11%. Add together the results of Steps 2 and 4. If the amount of contributions paid in respect of APP employments exceeds the amount produced by the formula below, the amount to be refunded is the excess. The formula is— 53 × (UEL – PT) × 11%. In any other case to which this Rule applies take the following Steps: the amount to be returned is the excess of the contributions actually paid by the earner over the amount found by Step 5 in the following sequence. Determine the amount of earnings between PT and UEL in respect of APP employments held in the year. Multiply the amount found by Step 1 by 11%. Subtract the amount found by Step 1 from that found by the formula— 53 × (UEL – PT) . Multiply the result produced by Step 3 by 9.4%. Add together the results of Steps 2 and 4. (7) From the amount otherwise falling to be returned under Rule 2 or Rule 3 in paragraph (6) there shall be deducted so much of any payment of contributions as is attributable to the application of Steps Five and Seven in regulation 2 1(2). (8) If— (a) an application has been made under paragraph (2) for the return of contributions in excess of the amount specified in regulation 21, and (b) the Board have been given notice under section 44(1) of the Pensions Act and have not rejected it, the contributions shall be returned in the order specified in paragraph (5) save that the contributions specified in sub-paragraph (c) shall be returned after those in sub-paragraphs (d) and (e). (9) Contributions paid by a secondary contributor on behalf of any person in excess of the amount specified in regulation 21— (a) if they are not recovered from that person by the secondary contributor, may be returned to the secondary contributor; and (b) if they are recovered by the secondary contributor from that person may be returned— (i) to that person; or (ii) with that person's consent given in writing or in such form and by such means of electronic communications as may be approved, to the secondary contributor.

13

In regulation 55(2)(b) (repayment of Class 1A contributions) for “emolument” substitute “ general earnings ”.

14

In regulation 57(1) (calculation of return of contributions)—

• (a) for “regulation 52 or 56” substitute “ regulation 52, 52A or 56 ”; and

• (b) in sub-paragraph (b) for “regulation 52(6)” substitute “ regulation 52(8) ”.

15

In regulation 67 (collection and recovery of earnings-related contributions and Class 1B contributions)—

• (a) in paragraph (1) for the words from “emoluments” to the end of the paragraph substitute— “ general earnings from an office or employment by virtue of regulations under section 684 of ITEPA 2003 (PAYE Regulations). ”; and

• (b) in paragraph (2) for “the Income Tax (Employments) Regulations 1993” substitute “ the PAYE Regulations ”.

16

In regulation 71(1) (due date for payment of a Class 1A contribution) after “19th July” insert “ or, where payment is made by an approved method of electronic communications in respect of earnings paid after 5th April 2004, not later than 22nd July ”.

17

In regulation 72 (Class 1A contribution due on succession to business)—

• (a) in paragraph (1)(a) for “emoluments” substitute “ general earnings ”;

• (b) in paragraph (2)—

• (i) for “income tax month”, in both places where it occurs, substitute “ tax month ”; and

• (ii) after “14 days” insert “ or, where payment is made by an approved method of electronic communications in respect of earnings paid after 5th April 2004, 17 days ”;

• (c) in paragraph (4)—

• (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (ii) for “income tax month”, in each place where it occurs, substitute “ tax month ”;

• (iii) in the definition of “relevant final tax month” (as amended by head (ii) of this sub-paragraph)—

• (aa) for “final payment of emoluments” substitute “ final payment of general earnings ”; and

• (bb) omit the words from “and for these purposes” to the end of the definition.

18

In regulation 73 (Class 1A contribution due on cessation of business)—

• (a) in paragraph (1) for “emoluments” substitute “ general earnings ”;

• (b) in paragraph (2)—

• (i) after “14 days” insert “ or where payment is made by an approved method of electronic communications in respect of earnings paid after 5th April 2004, 17 days ”;

• (ii) for “income tax month”, in each place where it occurs, substitute “ tax month ”; and

• (c) in paragraph (4)—

• (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (ii) for “income tax month”, in each place where it occurs, substitute “ tax month ”; and

• (iii) in the definition of “relevant final tax month” (as amended by head (ii) of this sub-paragraph)—

• (aa) for “final payment of emoluments” substitute “ final payment of general earnings ”; and

• (bb) omit the words from “and for these purposes” to the end of the definition.

19

In regulation 76(5) (interest on an overdue Class 1A contribution) after “19th July” insert “ or where payment is made by an approved method of electronic communications in respect of earnings paid after 5th April 2004, the 22nd July ”.

20

In regulation 80 (employer’s return where Class 1A contribution payable) —

• (a) in paragraph (1)(c) for “emoluments” substitute “ general earnings ”;