ERSM170750 - PAYE & NICs: NICs elections & agreements
Since 28 July 2000 there has been a facility whereby
- the employer and employee can agree or jointly elect for the employee to meet the employer’s liability to pay secondary NICs on share option gains, and
- the employee can get a deduction equal to the amount of NICs transferred (as elected) when working out the amount chargeable to income tax. A deduction is not allowed when working out the charge to NICs.
This provision was extended on 1 September 2004 to cover post-acquisition charges on restricted securities (Chapter 2 Part 7 ITEPA 2003) and convertible securities (Chapter 3 Part 7 ITEPA 2003).
Legislation
The legislation is set out in
- ITEPA03/S481 for securities options
- ITEPA03/S428A for restricted securities
- ITEPA03/S442A for convertible securities
- SSCBA92/SCH1 para 3A for agreements
- SSCBA92/SCH1 para 3B for elections
Pre approved legal documents
The government has announced changes to simplify the administration of a joint NIC election.
When entering into a joint NIC election from 1 May 2025, you will no longer need to send this document to HMRC to obtain approval if you use the HMRC pre-approved legal document which will be published on Gov.uk. Instead, you must retain copies of the template for your own records and present it to HMRC should it be requested.
The joint election will only become effective once it has been signed and dated by both the employee and the secondary contributor.
However, if you decide to write your own legal document as the joint NIC election, you must still submit it to HMRC for approval before asking an employee to enter into an agreement. HMRC will endeavour to provide an approval or issue a reply stating what changes or further information is needed, within 30 days.
Guidance notes are set out in ERSM170760.