Commentary on Sections Section 1: Zero-rate secondary Class 1 contributions for apprentices under 25
33.Subsection (1) provides for amendments to the Social Security Contributions and Benefits Act 1992 (SSCBA 1992).
34.Subsection (2) amends section 9 (calculation of secondary Class 1 contributions) by introducing the concept of a zero-rate of secondary Class 1 contributions for certain apprentices, alongside the secondary percentage and age-related secondary percentage.
35.Subsection (3) amends section 9A (the age-related secondary percentage) to clarify that it does not apply where new section 9B applies.
36.Subsection (4) inserts a new section 9B (zero-rate secondary Class 1 contributions for certain apprentices) into SSCBA 1992.
37.Subsection (1) of new section 9B provides that where a secondary Class 1 contribution is payable, this section will apply to earnings paid in the tax week if the employed earner is a relevant apprentice in relation to that employment.
38.Subsection (2) of new section 9B introduces the concept of a “relevant apprentice” and provides two criteria which must be met. The earner must be under the age of 25 and must be employed, in the employment, as an apprentice.
39.Subsection (3) of new section 9B provides that a person is still to be regarded as liable for secondary Class 1 NICs even though the amount of the contribution is nil because the secondary percentage is 0%. This provision ensures that whilst the requirement to pay secondary Class 1 NICs in respect of earnings paid to certain apprentices under the age of 25 is removed, a technical liability for such contributions continues to arise. As a result, the new zero-rate does not affect other legislation which relies on the existence of a secondary contributor, including the obligation to make statutory payments to employees such as Statutory Sick Pay and Statutory Maternity Pay.
40.Subsection (4) of new section 9B provides that the Treasury may make regulations to provide that, in relation to relevant apprentices, there will be set for every tax year an "upper secondary threshold" for secondary Class 1 NICs and to specify the amount of that threshold for that year.
41.Subsection (5) of new section 9B applies the regulation-making power in section 5(4) to (6) of SSCBA 1992 for the purposes of prescribing equivalents to the upper secondary threshold for earners paid otherwise than weekly, in the same way as they apply for the purposes of prescribing equivalents to the secondary threshold.
42.Subsections (6) and (7) of new section 9B provide that where a secondary Class 1 contribution is payable, the earner is a relevant apprentice, and the earnings paid in the tax week exceed that upper secondary threshold (or the prescribed equivalent), the zero-rate of secondary Class 1 contributions will not apply to those earnings in so far as they exceed that threshold (or the prescribed equivalent). In that case, the secondary percentage rate will apply to that part of the earnings.
43.Subsection (8) of new section 9B provides that the Treasury may make regulations modifying the effect of subsection (7) in a case where the earner falls within an age group to which an age-related secondary percentage normally applies. This will enable the legislation to take account of the fact that the upper secondary threshold for apprentices may be set at a different level to upper secondary thresholds for aged-related secondary percentages.
44.Subsection (9) of new section 9B provides that the Treasury may make regulations to prescribe the meaning of “apprentice” in subsection (2)(b).
45.Subsection (10) of new section 9B provides that the Treasury may make regulations to alter the age that an earner must be in order to be a relevant apprentice. Regulations made under this power may allow any earner of an age at which secondary Class 1 contributions are payable to be a relevant apprentice.
46.Subsection (5) amends section 176(1)(a) of SSCBA 1992 (parliamentary control of regulations and orders made under that Act) by inserting a reference to new sections 9B(4), (8) and (10). The effect of this is to require a statutory instrument containing regulations made using these powers to be laid in draft before, and approved by, each House of Parliament (‘the affirmative procedure’).
47.Subsections (6) to (10) amend the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (SSCB(NI)A 1992) to make equivalent provision to subsections (1) to (5) in relation to Northern Ireland.
48.Subsection (11) provides that the powers conferred on the Treasury under new section 9B and the amendments in new subsections (5) and (10) will come into force on 12 April 2015 (this is at the end of two months beginning with the day on which the Act is passed). For all remaining purposes the amendments will come into force on 6 April 2016.