Citation, commencement, effect and interpretation

1. —(1) These Regulations may be cited as the Social Security (Contributions) (Amendment) Regulations 2003, shall come into force on 6th April 2003 and shall have effect for the tax year beginning on that date and for subsequent tax years.

(2) In these Regulations “the principal Regulations” means the Social Security (Contributions) Regulations 2001( 4 ).

Amendment of the principal Regulations

2. Amend the principal Regulations as follows.

3. In regulation 1(2) (interpretation), in the definition of “non-contracted-out rate” for “the primary percentage for the time being specified in section 8(2) of the Act;” substitute “the main primary percentage for the time being specified in section 8(2)(a) of the Act( 5 )”.

4. —(1) Amend regulation 9 (earnings period for statutory maternity pay and statutory sick pay) as follows.

(2) In the heading to the regulation, after “statutory maternity pay” insert “, statutory paternity pay, statutory adoption pay”.

(3) For paragraph (2) substitute—

“ (2) If the Board make a payment of statutory maternity pay, statutory paternity pay or statutory adoption pay ( 6 ) under regulations made under the relevant provision—

(a) that payment of statutory maternity pay, statutory paternity pay or statutory adoption pay (as the case may be) shall not be aggregated with any other earnings; and

(b) the earnings period in respect of that payment for any week shall be a week.

(2A) In paragraph (2) “ the relevant provision ” means—

(a) in relation to statutory maternity pay, section 164(9)(b) ( 7 ) ,

(b) in relation to statutory paternity pay, section 171ZD(3) ( 8 ) , and

(c) in relation to statutory adoption pay, section 171ZM(3) ( 9 ) ,

of the Act (liability to make payments of the relevant statutory pay to be that of the Board). ” .

5. Amend regulation 10 (earnings limits and thresholds)( 10 ) as follows—

(a) for “2002” substitute “2003”;

(b) in paragraph (a) for “£75” substitute “£77”; and

(c) in paragraph (b) for “£585” substitute “£595”.

6. For regulation 21 substitute—

“ Annual maxima for those with more than one employment

21. —(1) For the purposes of section 19(1) and (2) of the Act (power to prescribe maximum amounts of contributions and repayments of excess) if an earner is employed in more than one employment his liability in any year—

(a) for primary Class 1 contributions; or

(b) where both primary Class 1 contributions and Class 2 contributions are payable by him, for both primary Class 1 contributions and Class 2 contributions,

shall not exceed an amount which equals the amount found in accordance with paragraph (2).

(2) The amount is found as follows.

• Step One

  Calculate—

  

  • Here UEL is the upper earnings limit, and PT the primary threshold, specified for the year.

• Step Two

  Multiply the result of Step One by 11 per cent.

• Step Three

  Add together, in respect of all of the employed earner’s employments, so much of the earnings in each of those employments as exceeds the primary threshold and does not exceed the upper earnings limit.

• Step Four

  From the sum produced by Step Three subtract the amount found by the formula in Step One.

• Step Five

  If the result produced by Step Four is a positive value, multiply it by 1 per cent.

  If that result is nil or a negative value, it is treated for the purposes of Step Eight as nil.

• Step Six

  Add together, in respect of all of the employed earner’s employments, so much of the earnings in each of those employments as exceeds the upper earnings limit.

• Step Seven

  Multiply the sum produced by Step Six by 1 per cent.

• Step Eight

  Add together the amounts produced by Steps Two, Five and Seven.

  The result of Step Eight is the annual maximum, subject to the further qualifications in paragraphs (3) and (4).

(3) For the purpose only of determining the extent of the earner’s liability for contributions under paragraph (2), the amount of a primary Class 1 contribution which is paid at a rate less than 11 per cent.—

(a) because the earner is in contracted-out employment, or

(b) because the earner is a married woman who has made an election to pay contributions at the reduced rate as mentioned in regulation 127,

shall be treated as equal to the amount of the primary Class 1 contribution which would be payable if the employment were not contracted-out or the election had not been made.

(4) Paragraph (2) is subject to—

(a) section 12 of the Act (late paid Class 2 contributions); and

(b) regulations 63 to 65 (special provisions about Class 2 and Class 3 contributions paid late).

(5) Notwithstanding paragraphs (1) to (4), an earner shall be liable, in the first instance, for the full amount of the contributions which would have been payable but for this regulation. ” .

7. In regulation 49(1) (precluded Class 3 contributions) ( 11 ) for “primary Class 1 contributions”, in each place where that expression occurs, substitute “primary Class 1 contributions, payable at the main primary percentage,”.

8. For regulation 84 (special provisions relating to primary Class 1 contributions) substitute—

“ 84. —(1) If in accordance with an arrangement authorised under regulation 68, notwithstanding paragraph 3(1) of Schedule 1 to the Act (method of paying Class 1 contributions), an earner is required to make direct payments in respect of primary Class 1 contributions in respect of earnings paid to him or for his benefit, the following provisions of this regulation apply.

(2) In a case to which this regulation applies—

(a) the earner shall be liable for such of the primary Class 1 contributions as are specified in the arrangements authorised under regulation 68, and

(b) the secondary contributor shall be liable for any other Class 1 contributions,

in respect of earnings paid to the earner or for the earner’s benefit from the employment in question.

(3) The Board shall notify the secondary contributor in writing of—

(a) the arrangement,

(b) the contributions for which, notwithstanding the arrangement, he will remain accountable to the Board, and

(c) the period to which the arrangement relates (“ the relevant period ”).

(4) During the relevant period, paragraph 3(1) of Schedule 1 to the Act (method of paying Class 1 contributions) shall not apply to the secondary contributor in respect of those contributions—

(a) to which the arrangement relates, and

(b) for which he would otherwise have been accountable to the Board,

unless and until the arrangement has been cancelled before the end of the period and the secondary contributor has been notified in writing of its cancellation. ” .

9. Omit regulation 85 (exception in relation to earnings to which regulation 84 applies).

10. In regulation 90(4) (condition for approval of alternative arrangements for payment of Class 2 and Class 3 contributions)—

(a) for “total amount of primary Class 1 contributions” substitute “total amounts of primary Class 1 contributions and Class 2 contributions”; and

(b) for “the maximum amount prescribed in regulation 21 for that year” substitute “the amount equal to 53 primary Class 1 contributions payable on earnings at the upper earnings limit for that year at the main primary percentage”.

11. —(1) Amend regulation 94 (exception from Class 4 liability by reference to Class 1 contributions paid on earnings chargeable to income tax under Schedule D) as follows.

(2) For the heading substitute—

“ Exception from Class 4 liability in respect of earnings from employed earner’s employment chargeable to income tax under Schedule D. ”

(3) For paragraph (1) substitute—

“ (1) If, for any year of assessment—

(a) an earner has earnings from employment which is employed earner’s employment; and

(b) those earnings are chargeable to income tax under Schedule D;

the earner shall be excepted from liability to pay contributions under section 15 of the Act on those earnings.

• This is subject to the following qualification. ” .

12. In regulation 95 (deferment of Class 4 liability where such liability is in doubt) for “until such later date” substitute “and for such period”.

13. —(1) Amend regulation 99 (calculation of liability for, and recovery of, Class 4 contributions after issue of certificate of deferment) as follows.

(2) In paragraph (1)(a) for “contributions payable” substitute “contributions, the payment of which has been deferred,”.

(3) In paragraph (3) for the words from “This is subject to paragraph (4)” to the end substitute “This is subject to the following qualification.”.

(4) In paragraph (4) for the words from “final and conclusive” to the end substitute “final and conclusive.”.

14. For regulation 100 (annual maximum of Class 4 contributions due under section 15 of the Act) substitute—

“ Annual maximum of Class 4 contributions due under section 15 of the Act

100. —(1) If, in respect of any year, there are payable by or in respect of an earner Class 4 contributions under section 15 of the Act ( 12 ) and also—

(a) primary Class 1 contributions or Class 2 contributions; or

(b) primary Class 1 contributions and Class 2 contributions,

paragraph (2) applies.

(2) If this paragraph applies, the earner’s liability for Class 4 contributions shall not exceed the maximum found in accordance with paragraph (3).

(3) The maximum is found as follows.

• Step One

  Subtract the lower profits limit from the upper profits limit for the year.

• Step Two

  Multiply the result of Step One by 8 per cent.

• Step Three

  Add to the result of Step Two 53 times the weekly amount of the appropriate Class 2 contribution.

• Step Four

  Subtract from the result of Step Three the aggregate amount of any Class 2 contributions and primary Class 1 contributions paid at the main primary percentage.

  The application of the following steps is determined by reference to the following three Cases.

  • Case 1

    If the result of this step is a positive value, and exceeds the aggregate of—

    (a)

    primary Class 1 contributions payable at the main primary percentage,

    (b)

    Class 2 contributions; and

    (c)

    Class 4 contributions payable at the main Class 4 percentage,

    in respect of the earner’s earnings, profits and gains for the year, the result of this step is the maximum amount of Class 4 contributions payable.

  • Case 2

    If the result of this step is a positive value, but does not exceed the aggregate mentioned in Case 1, the result of this step is the maximum amount of Class 4 contributions payable at the main Class 4 percentage.

  • Case 3

    If the result of this step is a negative value, the maximum amount of a Class 4 contribution payable at the main Class 4 percentage is nil and the result of this step is treated as nil.

    If Case 1 applies, Steps Five to Nine do not, but if Case 2 or Case 3 applies those Steps do apply.

• Step Five

  

• Step Six

  Subtract the lower profits limit from the lesser of the upper profits limit and the amount of profits for the year.

• Step Seven

  Subtract the result of Step Five from the result of Step Six.

  If the result of this step is a negative value, it is treated as nil.

• Step Eight

  Multiply the result of Step Seven by 1 per cent.

• Step Nine

  Multiply the amount by which the profits and gains for the year exceed the upper profits limit for the year by 1 per cent.

  The maximum amount of Class 4 contributions payable is—

  (a)

  where Case 1 of Step Four applies, the result of that step, and

  (b)

  where Case 2 or Case 3 of Step Four applies, the amount produced by adding together the results of Steps Four, Eight and Nine.

  This is subject to the qualifications in paragraphs (4) to (6).

  In this paragraph—

  “ lower profits limit ” means the lesser of the two monetary sums specified in section 15(3)(a) of the Act ( 13 ) ; and

  “ upper profits limit ” means the greater of those sums.

(4) For the purpose only of determining the extent of the earner’s liability for contributions under paragraph (3), the amount of a primary Class 1 contribution which would otherwise be payable at the main primary percentage but which is paid at a rate less than 11 per cent. because the earner—

(a) is in contracted-out employment, or

(b) is a married woman who has made an election to pay contributions at the reduced rate as mentioned in regulation 127,

shall be treated as equal to the amount of the primary Class 1 contribution payable at the main primary percentage, which would be so payable if the employment were non-contracted-out employment or the election had not been made (as the case may be).

(5) Paragraph (2) is subject to the provisions of section 12 of the Act and to regulations 63 to 65.

(6) Notwithstanding paragraphs (1) to (5), an earner shall be liable, in the first instance, for the full amount of the contributions which would have been payable but for this regulation. ” .

15. In regulation 103(2) (Class 4 liability of earners treated as self-employed who would otherwise be employed earners) for the words from “of an amount equal” to the end substitute—

“ of an amount equal to the aggregate of—

(a) the main Class 4 percentage of so much of the total of those earnings as exceeds the lower, but does not exceed the higher, of the money sums, and

(b) the additional Class 4 percentage of so much of the total of those earnings as exceeds the higher of the money sums,

for the time being specified in section 18(1A) ( 14 ) . ” .

16. —(1) Amend Schedule 4 (provisions derived from the Income Tax Acts and the Income Tax (Employments) Regulations 1993( 15 )) as follows.

(2) In paragraph 7(13)—

(a) in paragraph (b)—

(i) for sub-paragraphs (iv) and (v) substitute—

“ (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; ” ;

(ii) after sub-paragraph (vi) insert—

“ (vii) any statutory paternity pay; and

(viii) any statutory adoption pay.

The amounts to be recorded under sub-paragraphs (iv) and (v) are the amounts of contributions after deducting the amount of any reduction calculated in accordance with section 41(1) to (1B) or section 42A(1) to (2A) of the Pensions Act ( 16 ) (“the reduction”), subject to the following qualification.

If the amount of the reduction exceeds the amount of the contributions in respect of which it falls to be made, the amount to be entered under sub-paragraph (v) is nil. ” ; and

(b) omit paragraph (c).

(3) In paragraph 9(1)—

(a) after paragraph (e) insert—

“ (f) the amount of statutory maternity pay paid to the employee;

(g) the amount of statutory paternity pay paid to the employee; and

(h) the amount of statutory adoption pay paid to the employee; ” ; and

(b) for “head (e)” substitute “paragraph (e)”.

(4) For paragraph 11(4) substitute—

“ (4) The condition specified in this sub-paragraph is that for income tax months falling within the current year, the average monthly amount found by the formula below will be less than £1500.

The formula is—

(5) In paragraph 22—

(a) in sub-paragraph (1)(c)—

(i) in sub-paragraph (i) for “heads (i) to (iv)” substitute “sub-paragraphs (i) to (v)”; and

(ii) omit sub-paragraphs (ii) and (iii);

(b) at the end of sub-paragraph (1)(d) omit “and” and insert—

“ (da) the total amount of statutory paternity pay paid during the year;

(db) the total amount of statutory adoption pay paid during the year; and ” ; and

(c) at the end of sub-paragraph (2)(d) omit “and” and insert—

“ (da) in respect of statutory paternity pay paid during that year to all his employees the total of the amounts determined under regulation 5 of the Statutory Paternity Pay and Statutory Adoption Pay (Administration) Regulations 2002 ( 21 ) ;

(db) in respect of statutory adoption pay paid during that year to all his employees the total of the amounts determined under regulation 5 of the Statutory Paternity Pay and Statutory Adoption Pay (Administration) Regulations 2002; and ” .

(6) In paragraph 26 (inspection of employer’s records) after sub-paragraph (3) insert—

“ (3A) Where records are maintained by computer, the employer shall provide the officer with all facilities necessary for obtaining information from them. ” .