Employment Tax

Earners categorised by regulation

Produced by Tolley in association with Jim Yuill at The Yuill Consultancy
  • 19 Oct 2021 23:17

The following Employment Tax guidance note Produced by Tolley in association with Jim Yuill at The Yuill Consultancy provides comprehensive and up to date tax information covering:

  • Earners categorised by regulation
  • Background
  • Employments to be disregarded for NIC
  • Employments treated as employed earners employment for NIC
  • Employment treated as self-employment for NIC
  • Provisions to identify secondary Class 1 contributors in particular cases
  • Continuing self-employment for NIC

Earners categorised by regulation

Background

When applying the usual employment status tests to individuals, the tax and NIC position will generally be the same. However, there are certain individuals who, because of social security benefit entitlement purposes or administrative convenience, are treated differently.

SSCBA 1992, ss 2(2), 7(2) allow that regulations may provide for:

  1. employment and the earnings from that employment to be disregarded for NIC liability purposes

  2. a person in any prescribed employment to be treated as falling within a category of earner other than that in which they would otherwise fall

  3. the secondary contributor to be specifically defined

In simple terms, this means that certain employments will be disregarded altogether; some individuals who would be self-employed for tax purposes under the usual rules (see the Employment status tests guidance note) would be treated as employed earners and in the same way that some employed earners would be treated as self-employed. The detail is found in the Social Security (Categorisation of Earners) Regulations 1978, SI 1978/1689.

Employments to be disregarded for NIC

The following types of employment are disregarded for NIC:

  1. employment by close relatives provided that the employment is in a private dwelling house in which both the employee and employer reside and it is not employment for the purposes of any trade or business carried on there by the employer. The legislation lists the close relatives for this purpose as the father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister of the person employed. The most common disregard here will be anyone employed in a domestic capacity in the household but could extend to a chauffeur, gardener, handyman or companion, and similar roles

  2. employment of a person by their spouse / civil partner, whether or not under a contract of service, otherwise than for the purposes of the employment of the spouse. This is a very narrow disregard, not applying where an individual is employed in connection with their

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