Q&As

Can employer NICs costs be passed to the employee in relation to a share incentive award which can be settled in cash instead of shares?

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Published on LexisPSL on 04/02/2016

The following Share Incentives Q&A provides comprehensive and up to date legal information covering:

  • Can employer NICs costs be passed to the employee in relation to a share incentive award which can be settled in cash instead of shares?

Although there is a general prohibition on passing on employer National Insurance contributions (NICs) costs to an employee, this does not apply in the case of certain charges on share-based incentive awards, including in relation to any gain which arises in respect of an employment-related securities option as specified under section 479 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). A gain of this type will typically apply where the employee acquires shares on the exercise of the option, or where he releases or assigns the option in return for a cash payment, or he otherwise receives a benefit in connection with the option.

In these circumstances it is possible for the employer and the employee to either enter into an agreement which allows the employer to recover the employer NICs which arises, or to make a joint election under which the employer NICs liability passes to the employee.

However, in order for this to be possible it is

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