The Social Security (Contributions) (Amendment No. 3) Regulations 2003

Amendment of the principal Regulations

3.—(1) Amend Schedule 2 (calculation of earnings for the purposes of earnings-related contributions in particular cases) as follows.

(2) At the end of sub-paragraph (1) of each of paragraphs 10 and 11 add “except where paragraph 11A applies”.

(3) After paragraph 11 (exercise of right to acquire shares gained as a director or employee before 6th April 1999) insert—

“Exercise, assignment or release of share option — market value of option or resulting shares increased by things done otherwise than for genuine commercial purposes

11A.—(1) This paragraph applies for calculating or estimating the amount of earnings which is comprised in a payment which—

(a)would be disregarded in the computation of earnings for the purposes of earnings-related contributions by virtue of paragraph 16 of Part 9 of Schedule 3; but

(b)is not disregarded because paragraph 17 of that Part applies to it.

(2) If this paragraph applies, the amount of earnings to be taken into account for the purpose of earnings related contributions is the amount which would, but for paragraph 16 of Part 9 of Schedule 3, have been taken into account by virtue of section 4(4)(a) of the Act(1).

• This is subject to the following qualification.

(3) If—

(a)the right to acquire shares in a body corporate is not capable of being exercised more than ten years after the date on which it was obtained,

(b)an amount of earnings was taken into account for the purpose of earnings-related contributions in respect of the earner’s obtaining that right, at the time he obtained it (“the deductible amount”), and

(c)no exercise, assignment or release of the whole or any part of—

(i)that right,

(ii)any right replacing that right (“a replacement right”), or

(iii)any subsequent replacement right,

has occurred on or after 10th April 2003,

the deductible amount may be deducted from the amount otherwise to be taken into account by virtue of this paragraph.”.