National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

26 April 2019

The Bill provides for Class 1A national insurance contributions to be made on certain termination awards and to provide for the controller of a sporting testimonial to be the person liable to pay Class 1A national insurance contributions on payments from money raised by the testimonial.

 

The Bill makes provisions to amend:

 

  • The Social Security Contributions and Benefits Act 1992 (Class 1A contributions: benefits in kind etc.)

 

  • The Social Security Contributions and Benefits (Northern Ireland) Act 1992 (Class 1A contributions: benefits in kind etc.)

Termination payments

The aim of the Bill is to bring about reforms that will more closely align the treatment of employer NICs (Class 1A) on termination payments in excess of £30,000 that are subject to PAYE income tax.  At present some forms of termination awards are exempt from both employee and employer NICs and the first £30,000 is free from Income Tax.

This Bill will not affect:

 

  • Employee NICs treatment of termination awards
  • NICs treatment of statutory redundancy pay and compensation

Income Tax changes were made in the Finance (No 2) Act 2017 which took effect from 6 April 2018.

 

Sporting Testimonials

 

This Bill aims to align the NICs treatment of income from sporting testimonials with the tax treatment by:

 

  • bringing payments from sporting testimonials that are non-contractual or non-customary and organised by an independent testimonial committee within the scope of Class 1A NICs
  • applying the existing £100,000 Income Tax exemption to the NICs treatment
  • ensuring the new NICs threshold will apply to only one testimonial in a lifetime, which could come from one event or a series of events held over a 12 calendar month ‘testimonial year’

Income Tax changes were made in the Finance Act 2016 and took effect from 6 April 2017.

 

Regulations have yet to be laid that will enact this provision, but in the meantime, a summary of the bill has been provided in guidance on NICs Termination Payments and Sporting Testimonials Bill

 

If you have any questions about the Bill they can be submitted to HMRC by email to [email protected].