Paragraph 7 Calculation of deduction

United Kingdom

(1)

Subject to sub-paragraph (2), on making any payment of F1F2... earnings to the employee, the employer may deduct from those ... earnings the amount of the earnings-related contributions based on those ... earnings F3... which the employee is liable to pay under section 6(4) of the Act F4(the “section 6(4)(a) amount”).

F5(1A)

On making any chain payment the F6deemed employer may deduct the amount of earnings related contributions calculated by reference to the deemed direct earnings which the deemed employer is liable to pay.

F7(1B)

In sub-paragraph (1A) “chain payment”, “deemed direct earnings” and “deemed employer” have the meanings given in regulations 14(2)(a), 14(3) and 20(5) respectively of the Social Security Contributions (Intermediaries) Regulations 2000.

(2)

Where two or more payments of ... earnings fall to be aggregated, the employer may deduct the amount of the earnings-related contributions based on those ... 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.

F8(3)

If the employer–

(a)

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

(b)

is treated as making a payment of ... 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 ... earnings made by the employer to that employee during F9the same year and, where the case falls within paragraph (b) F10or sub-paragraph 4(a) or (f), during the following year.

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

F11(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 ... 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 ... 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)F12;

F13(c)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)

the ... 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; F14...

F15(e)

the employer is treated as making a payment of ... earnings by paragraph 4AF16; or

F17(f)

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

(5)

For the purposes of sub-paragraphs (3), F18(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 F19in a case falling within paragraph (a) of any of those sub-paragraphs F20except 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.

F21This is subject to the following qualification.

F22(5A)

Where a payment—

(a)

falls within sub-paragraph (4)(e) F23or (f),

(b)

comprises a beneficial interest in F24securities, 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 F25section 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.

F26(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 ... 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 F27securities,

(ii)

a conditional interest in securities or a beneficial interest in convertible securities treated as earnings under F28regulation 22(5), (6) or (7),

(iii)

any gain on which the ex-employee is chargeable to tax by virtue of F29section 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 F30section 6(4)(a) amount.

F31(10)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F32...

(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 F33securities referred to in of sub-paragraph 9(b)(i) and (ii); or

(b)

the 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 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 ... 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,

F34(ii)

earnings which exceed the current lower earnings limit but do not exceed the current primary threshold,

F35(iii)

earnings which exceed the current primary threshold but do not exceed the F36current upper earnings limit,

F37(iiia)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F38(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;

F39(vii)

any F40... statutory paternity pay;

F41(viia)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F42(viii)

any statutory adoption pay; F43...

F44(ix)

any statutory shared parental payF45; ~~F46and~~

(x)

any statutory parental bereavement pay F47; and

(xi)

any statutory neonatal care pay.

F48...

F49(c)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14)

Where 2 or more payments of ... 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 ... earnings he shall record under the name of the employee to whom he pays the ... earnings—

(a)

the date of payment;

(b)

the amount of the ... earnings, excluding any allowable F50pension contributions; and

(c)

any allowable pension contributions;

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

Annotations

Textual amendments

F1

Word in Sch. 4 para. 7 omitted (6.4.2015) by virtue of The Social Security (Miscellaneous Amendments No. 2) Regulations 2015 (S.I. 2015/478), regs. 1(4), 22(3)(b)

F2

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)

F3

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)

F4

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)

F5

Sch. 4 Pt. II para. 7(1A) inserted (6.4.2017) by The Social Security (Miscellaneous Amendments No. 2) Regulations 2017 (S.I. 2017/373), regs. 1, 4(3)

F6

Words in Sch. 4 para. 7(1A) substituted (6.4.2021 immediately after S.I. 2020/1150 comes into force) by The Social Security Contributions (Intermediaries) (Miscellaneous Amendments) Regulations 2020 (S.I. 2020/1220), regs. 1(2), 3(2)(a)

F7

Sch. 4 para. 7(1B) inserted (6.4.2021 immediately after S.I. 2020/1150 comes into force) by The Social Security Contributions (Intermediaries) (Miscellaneous Amendments) Regulations 2020 (S.I. 2020/1220), regs. 1(2), 3(2)(b)

F8

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)

F9

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)

F10

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)

F11

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)

F12

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.

F13

Sch. 4 para. 7(4)(c) and word omitted (6.4.2016) by virtue of The Social Security (Contributions) (Amendment) (No. 2) Regulations 2016 (S.I. 2016/352), regs. 1, 18(a)(i) (with reg. 20)

F14

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)

F15

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)

F16

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)

F17

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)

F18

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)

F19

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)

F20

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)

F21

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)

F22

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)

F23

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)

F24

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)

F25

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)

F26

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)

F27

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)

F28

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)

F29

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)

F30

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)

F31

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)

F32

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

F33

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)

F34

Sch. 4 para. 7(13)(b)(ii) substituted (6.4.2012) by The Social Security (Contributions) (Amendment No. 3) Regulations 2012 (S.I. 2012/821), regs. 1(1), 21(a)

F35

Sch. 4 para. 7(13)(b)(iii) substituted (6.4.2012) by The Social Security (Contributions) (Amendment No. 3) Regulations 2012 (S.I. 2012/821), regs. 1(1), 21(b)

F36

Words in Sch. 4 para. 7(13)(b)(iii) substituted (6.4.2016) by The Social Security (Contributions) (Amendment) (No. 2) Regulations 2016 (S.I. 2016/352), regs. 1, 18(a)(ii)(aa) (with reg. 20)

F37

Sch. 4 para. 7(13)(b) (iiia) omitted (6.4.2016) by virtue of The Social Security (Contributions) (Amendment) (No. 2) Regulations 2016 (S.I. 2016/352), regs. 1, 18(a)(ii)(bb) (with reg. 20)

F38

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)

F39

Sch. 4 para. 7(13)(b)(vii)(viia) substituted for Sch. 4 para. 7(13)(b)(vii) (14.11.2010) by The Social Security (Contributions) (Amendment No. 5) Regulations 2010 (S.I. 2010/2450), regs. 1, 4(2)

F40

Word in Sch. 4 para. 7(13)(b)(vii) omitted (5.4.2015) by virtue of The Social Security and Tax Credits (Miscellaneous Amendments) Regulations 2015 (S.I. 2015/175), reg. 2(2)(3), 4(2)(a) (with reg. 9)

F41

Sch. 4 para. 7(13)(b) (viia) omitted (5.4.2015) by virtue of The Social Security and Tax Credits (Miscellaneous Amendments) Regulations 2015 (S.I. 2015/175), reg. 2(2)(3), 4(2)(b) (with reg. 9)

F42

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)

F43

Word in Sch. 4 para. 7(13)(b)(viii) omitted (6.4.2020) by The Social Security (Contributions) (Amendment) Regulations 2020 (S.I. 2020/239), regs. 1, 2(3)(a)(i) (which amendment was extended to N.I. (6.4.2022) by S.I. 2022/384, reg. 3)

F44

Sch. 4 para. 7(13)(b)(ix) and word inserted (5.3.2015) by The Social Security and Tax Credits (Miscellaneous Amendments) Regulations 2015 (S.I. 2015/175), reg. 2(2)(3), 4(2)(d)

F45

Sch. 4 para. 7(13)(b)(x) and word inserted (6.4.2020) by The Social Security (Contributions) (Amendment) Regulations 2020 (S.I. 2020/239), regs. 1, 2(3)(a)(ii) (which amendment was extended to N.I. (6.4.2022) by S.I. 2022/384, reg. 3)

F46

Word in Sch. 4 para. 7(13)(b)(ix) omitted (E.W.S.) (6.4.2025) by virtue of The Social Security (Contributions) (Amendment No. 4) Regulations 2025 (S.I. 2025/328), regs. 1, 2(3)(a)(i)

F47

Sch. 4 para. 7(13)(b)(xi) and word inserted (E.W.S.) (6.4.2025) by The Social Security (Contributions) (Amendment No. 4) Regulations 2025 (S.I. 2025/328), regs. 1, 2(3)(a)(ii)

F48

Words in Sch. 4 para. 7(13)(b) omitted (6.4.2016) by virtue of The Social Security (Contributions) (Amendment) (No. 2) Regulations 2016 (S.I. 2016/352), regs. 1, 18(a)(ii)(cc) (with reg. 20)

F49

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)

F50

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)

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.

Notes on Schedule 4

Textual amendments

F1: Sch. 4 heading substituted (6.4.2004) by The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 29(2)