NIM12003 - Class 1: Calculating Class 1 NICs for Directors: Definition of Director: Annual earnings period

Regulation 8 Social Security (Contributions) Regulations 2001 (SSCR 2001) (SI 2001 No 1004)听

鈥楧irector鈥� is defined when deciding what earnings period should be used for a payment of earnings. The regulations听refer听to 鈥渄irector of a company鈥�.

鈥淐ompany鈥� is defined in Regulation 1(2) and includes:听

  • a registered company within Section 1 Companies Act 2006, or听
  • an unregistered company within Section 1043(1) Companies Act 2006听

A company within Section 1 is one formed and registered under one of the 1929, 1948 to 1983, 1985 or 2006 Companies Acts. If a company has a company registered number, it will be within Section 1. 听
听
A company within Section 1043(1) is not registered under Section 1 but is any body corporate incorporated in, and having a place of business in the United Kingdom, but does not include:听

  • bodies incorporated by, or registered under, a public general Act of Parliament;听
  • bodies not formed for the purpose of carrying on a business that has for its object the acquisition of gain by the body or its individual members;听
  • bodies for the time being exempted from this section by direction of the Secretary of State;听
  • open-ended investment companies.听
  • protected cell companies registered under Part 4 of the Risk Transformation Regulations 2017.听

What this means is that a director of a company, not within Sections 1 and 1043 Companies Act 2006, does not have an annual earnings period. Any remuneration is still liable to Class 1 NICs because a director is an office holder and earnings periods for such directors will be within the normal rules for employed earners (see鈥�NIM08000).听
听
Examples of directors of companies or bodies corporate that are not within regulation 8 are:听

  • Building Societies, which have not de-mutualised.听
  • Charities, but not a trading company set up by the charity听
  • Non-British based foreign companies听
  • Building Societies are excluded from the Companies Act because of the provisions of the Building Society Acts.听

It should be noted that the definition of a company for regulation 27 SSCR 2001 (certain payments to members of professional partnerships and nominee directors) is wider than that used for regulation 8 (see鈥�NIM12010).听

Any case should be submitted to IPD NICs Technical听Team where there appears to have been a deliberate attempt to circumvent the directors鈥� annual earnings period legislation.听