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

From HM Revenue & Customs · National Insurance Manual

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

‘Director’ is defined when deciding what earnings period should be used for a payment of earnings. The regulations refer to “director of a company”.

“Company” is defined in Regulation 1(2) and includes:

  • a registered company within Section 1 Companies Act 2006, or

  • an unregistered company within Section 1043(1) Companies Act 2006

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.

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:

  • bodies incorporated by, or registered under, a public general Act of Parliament;

  • 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;

  • bodies for the time being exempted from this section by direction of the Secretary of State;

  • open-ended investment companies.

  • protected cell companies registered under Part 4 of the Risk Transformation Regulations 2017.

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 NIM08000).

Examples of directors of companies or bodies corporate that are not within regulation 8 are:

  • Building Societies, which have not de-mutualised.

  • Charities, but not a trading company set up by the charity

  • Non-British based foreign companies

  • Building Societies are excluded from the Companies Act because of the provisions of the Building Society Acts.

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 NIM12010).

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