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NICs on termination payments and disguised remuneration

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The Social Security (Contributions) (Amendment No. 2) Regulations, SI 2018/257, apply new NICs rules to payments-in-lieu-of-notice and protect certain third-party employers from liability to NICs under the disguised remuneration loan charge.

The regulations apply a class 1 NICs liability to all payments-in-lieu-of-notice that fall within the new definition of ‘post-employment notice pay’, introduced by F(No. 2)A 2017, which will cease to benefit from the £30,000 tax-free threshold with effect from 6 April 2018.

In addition, the regulations ensure that host employers who were not party to certain avoidance arrangements will not be liable for secondary class 1 NICs arising in connection with the disguised remuneration loan charge from 5 April 2019. A draft of this latter provision was annexed to the December 2017 technical note outlining the disguised remuneration measures in Finance Bill 2018.