857.The provision in the Act does three things. First, it allows employers and employees to reach an agreement that a secondary contributor (usually the employer) may recover from the employee some or all of the secondary NIC in respect of a gain made from a right to acquire shares. These gains usually take the form of the exercise of share options.
858.Second, as an alternative, the employer may make an application for approval of an election to the Board of Inland Revenue. If approval is obtained, the employer and employee can jointly elect to transfer all or some of the liability to pay the secondary NIC on the share option gain to the employee. Elections can only be made when the Board are satisfied that the election to be used will transfer the liability, and that the accompanying arrangements will ensure that the NIC liability transferred to the employee is paid.
859.Third, the provision strengthens the existing statutory bar that prevents the employer recovering any part of the secondary NIC in respect of all forms of earnings (subject to the new exception for rights to acquire shares). It extends the protection to the employee by ensuring that the person liable to pay the Class 1A (on benefits in kind) or Class 1B (on Pay As You Earn Voluntary Settlement Agreements) cannot recover his liability from the employee.
Part IV: National Insurance Contributions Background Share options