Regulation 40C Special provisions for reporting, payment and collection of Class 1A contributions relating to termination awardsF1

(1)

This regulation applies to a person (“LP”) who is liable to pay Class 1A contributions in respect of a termination award in accordance with section 10(1A) and (3A) of the Act.

(2)

LP must—

(a)

on or before making the termination award, deliver to HMRC the information specified in Schedule 4A (real time returns), and

(b)

pay the Class 1A contributions to HMRC within the applicable time limit specified in either paragraph 10 (monthly payment of contributions by employer) of Schedule 4 (provisions derived from income tax acts and pay as you earn regulations) or paragraph 11 (quarterly payments of contributions by employer) of that Schedule.

(3)

Paragraphs 11ZA (payments and recoveries for each tax period by Real Time Information employers: returns), 15 (specified amount of earnings-related contributions payable by the employer), 21E (returns under paragraphs 21A and 21D: amendments), 21EA (failure to make a return under paragraph 21A and 21D), 21G (penalty: failure to comply with paragraph 21A or 21D) and 26 (retention by employer of contribution and election records) of Schedule 4 apply to LP with the following modifications—

(a)

references to “earnings” are to be read as references to termination awards,

(b)

references to “the employer” are to be read as references to LP, and

(c)

references to “earnings related contributions” are to be read as references to any Class 1A contributions that LP is liable to pay in respect of the termination award.

(4)

Paragraphs (2) and (3) do not apply where paragraph (6) applies.

(5)

Paragraph (6) applies where—

(a)

a termination award consists of the provision of a benefit which is an asset provided to a person (“P”) by or on behalf of P’s former employer, and

(b)

the asset is made available to P without any transfer of ownership of that asset.

(6)

Where this paragraph applies—

(a)

LP must report and pay to HMRC any Class 1A contributions due in respect of the benefit referred to in paragraph (5) for a tax year in accordance with regulations 70 (payment of Class 1A contributions) and 71 (due date for payment of a Class 1A contribution), and

(b)

regulation 55 (repayment of Class 1A contributions) and regulations 74 (employer failing to pay a Class 1A contribution) to 83A (requirement to give security or further security for amounts of Class 1A contributions) apply with regard to the reporting, repayment and payment of interest on such payments.

(7)

Where a termination award consists of a cash benefit and one or more other benefits, the Class 1A liability is calculated by applying the threshold provided for in section 403(1) and (4) of ITEPA 2003 against those benefits in the following order—

(a)

the cash benefit,

(b)

any benefit which consists of an asset where ownership has been transferred to P,

(c)

any other benefit which consists of an asset that has been made available to P without any transfer of ownership.

(8)

Regulations 72 (Class 1A contribution due on succession to business) and 73 (Class 1A contribution due on cessation of business) apply to LP as if LP was the employer referred to in paragraph (1)(a) of each of those regulations.

Annotations

Textual amendments

F1: Reg. 40C - Reg. 40D inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Social Security (Contributions) (Amendment No. 2) Regulations 2020 (S.I. 2020/300), regs. 1(1), 7

Notes on the whole SI

Textual amendments

F1: See sections 3(2) and (5), 4(5) and (6), 116, 117, 118, 119 and 120 of the Social Security Contributions and Benefits Act 1992 (c. 4) (“the Act”) as amended respectively by paragraphs 3, 4, 22, 23, 24, 25 and 26 of Schedule 3 to the Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2) (“the Transfer Act”). The functions of the Department of Health and Social Services for Northern Ireland under the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) and the Social Security Administration (Northern Ireland) Act 1992 (c. 8) 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).
F2: See section 176(2)(b) of the Act.