NIM12025 - Class 1: Calculating Class 1 NICs for Directors: Annual earnings periods: Directorship ceases and earnings paid in subsequent tax year
Regulation 8(5) of the Social Security (Contributions) Regulations 2001 (SSCR 2001) (SI 2001 No 1004)
»Ê¹ÚÌåÓýapp earnings period is the year in which earnings are paid if the earnings are paid in a tax year after the directorship ceased and they can be linked to any period during which the directorship was held. »Ê¹ÚÌåÓýapp earnings are not aggregated with any other earnings with which they would normally fall to be aggregated.
For example, if an employee ceases to be a director in the 2020 to 2021 tax year but remains with the company as an employee and in July 2021 receives:
- fees which relate to the period of the directorship in the 2020 to 2021 tax year and
- his or her normal monthly salary as an employee
NICs should be calculated:
- on the fees by reference to an annual earnings period - in this case the 2021 to 2022 tax year and
- on the salary by reference to the normal monthly earnings period.
»Ê¹ÚÌåÓýapp position where a director receives earnings in respect of his directorship in a tax year after he resigns but those earnings cannot be attributable to any period is currently under review. Although cases where such a period cannot be established will be rare, you should refer any cases to IPD Technical.