NIC and Statutory Payments Bill 2003

The National Insurance Contributions and Statutory Payments Bill 2003 was introduced into the House of Commons on 27 November 2003.

Once Royal Assent has been granted, employers whose employees have the opportunity to acquire securities provided to them "by reason of employment" (under the new provisions introduced by Schedule 22 Finance Act 2003) will be able to ask their employees to pay the employer's National Insurance contributions arising on any awards of restricted or convertible securities. (Currently, employers are only permitted to ask employees to bear the employer's National Insurance contributions on gains realised on the exercise of securities options). Employers will also be able to withhold, with the employees' agreement, enough of the securities awarded to employees to cover the employees' and employer's NIC liability.

It is not permitted to implement these agreements between employers and employees until after Royal Assent and implementation of the supporting Regulations. We do not know yet when Royal Assent is likely to be granted, but we will publish further details as soon as they are available.

These new provisions are likely to prove particularly important for companies that incentivise their staff by providing securities at nil or discounted cost or in the context of corporate transactions, such as management buy-outs.

In addition to the provisions relating to securities, the Bill also introduces changes that aim to align some elements of the administration of National Insurance contributions, Statutory Sick Pay and Statutory Maternity Pay with the administration of income tax.

If you would like to discuss the draft legislation or have any other queries relating to securities and/or securities options, please contact Kate Kelleher, partner in London ([email protected]; tel: 020 7367 2860).