Q&As

Can employer’s National Insurance contributions be passed on to an option holder on a cash cancellation of an award?

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Published on LexisPSL on 26/08/2020

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

  • Can employer’s National Insurance contributions be passed on to an option holder on a cash cancellation of an award?

For details of when National Insurance contributions (NICs) charges, namely primary and secondary Class 1 NICs and Class 1A NICs, arise in the context of employment-related securities and securities options, see Practice Note: NICs implications of employment-related securities and securities options. Legislation dictates that there are certain circumstances in which an employer may, and may not, recover employer's NICs from an employee or director.

There is a general prohibition upon any person liable to pay any secondary (broadly employer) Class 1, Class 1A or Class 1B NICs from:

  1. deducting

  2. otherwise recovering, or

  3. entering into any agreement for so deducting or recovering

such contributions.

There are two specific exceptions to the general prohibition on recovering emplo

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