HM Revenue and Customs (HMRC) has made changes to its approval procedures on national insurance contribution (NIC) joint elections for employee share plans.
Under the Child Support, Pensions and Social Security Act 2000, an employee can opt to meet their employer's secondary Class 1 NIC liability arising on share option gains, either in the form of an agreement or a joint election, In the case of the latter this must be approved by HMRC.
However, in recent months, a number of draft elections submitted for approval have included other clauses not within the scope of the legislation. These include, for example, indemnities in favour of the company against any expenses incurred if the employee fails to satisfy their liability for secondary NIC.
HMRC has now issued guidance on joint elections specifying that, as from 1 December, those containing additional elements outside of the strict scope of the legislation will not be approved. The guidance sets out what should be included in the joint election so that it meets the legislative requirements.
Instead, employers will need to draw up agreements separate from the joint election to cover the additional terms and clauses they want to put in place.
Julie Richardson, head of employee share ownership at Ifs ProShare, said: "This is about HMRC fine-tuning its approval procedures to cover only what is required by the legislation.
"It does not impact on a company's ability to agree additional terms and clauses with an employee."