Class 2 contributions

1 Reform of Class 2 contributions

Schedule 1 contains provision relating to Class 2 national insurance
contributions.

2 5Consequential etc power

(1) The Treasury may by regulations make consequential, incidental or
supplementary provision in connection with the provision made in Schedule 1.

(2) Regulations under this section may modify any provision of an Act or an
instrument made under an Act.

(3) 10In subsection (2) “modify” includes amend, repeal or revoke.

(4) Section 175(3) to (5) of SSCBA 1992 (various supplementary powers) applies to
the power to make regulations conferred by this section.

(5) Regulations under this section must be made by statutory instrument.

(6) A statutory instrument containing regulations under this section is subject to
15annulment in pursuance of a resolution of either House of Parliament.

Follower notices, accelerated payments and promoters of avoidance

3 Application of Parts 4 and 5 of FA 2014 to national insurance contributions

(1) Part 1 of Schedule 2 applies Part 4 of FA 2014 (follower notices and accelerated
payments) to Class 1, 1A, 1B and certain Class 2 contributions.

(2) 5Part 2 of that Schedule applies Part 5 of that Act (promoters of tax avoidance
schemes) to Class 1, 1A, 1B and certain Class 2 contributions.

(3) Part 3 of that Schedule applies Parts 4 and 5 of that Act to Class 4 contributions.

(4) Part 4 of that Schedule contains commencement and transitory provision.

4 Provision in consequence etc of tax-only changes to Part 4 or 5 of FA 2014

(1) 10Where a modification is made to Part 4 of FA 2014 (follower notices and
accelerated payments) or Part 5 of that Act (promoters of tax avoidance
schemes) that does not apply in relation to national insurance contributions
(“the tax-only modification”), the Treasury may by regulations—

(a) make provision for the purpose of applying the tax-only modification
15in relation to national insurance contributions (with or without
modifications),

(b) make provision in relation to national insurance contributions
corresponding to the tax-only modification, or

(c) otherwise modify the Part concerned, as it has effect in relation to
20national insurance contributions, in consequence of, or for the purpose
of making provision supplementary or incidental to, the tax-only
modification.

(2) Regulations under this section—

(a) may amend, repeal or revoke any provision of an Act or instrument
25made under an Act (whenever passed or made),

(b) may make consequential, incidental, supplementary, transitional,
transitory or saving provision, and

(c) may make different provision for different cases, classes of national
insurance contributions or purposes.

(3) 30Regulations under this section must be made by statutory instrument.

(4) A statutory instrument containing (with or without other provision)
regulations under this section that amend or repeal a provision of an Act may
not be made unless a draft of the instrument has been laid before, and
approved by a resolution of, each House of Parliament.

(5) 35A statutory instrument containing regulations under this section that does not
have to be approved in draft under subsection (4) is subject to annulment in
pursuance of a resolution of either House of Parliament.

(6) In this section “national insurance contributions” means contributions under
Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992.

(7) 40This section comes into force at the end of the period of 2 months beginning
with the day on which this Act is passed.

Anti-avoidance

5 Categorisation of earners etc: anti-avoidance

(1) In the Social Security (Categorisation of Earners) Regulations 1978 (S.I. 1978/
1689) (“the 1978 GB regulations”), after regulation 5 insert—

“5A 5Anti-avoidance

(1) Paragraph (2) applies if—

(a) an earner has an employment in which the earner personally
provides services to a person who is resident or present or has
a place of business in Great Britain,

(b) 10a third person enters into relevant avoidance arrangements, and

(c) but for paragraph (2), the earner would not be, and would not
be treated as falling within the category of, an employed earner
in relation to the employment.

(2) The earner is to be treated as falling within the category of an employed
15earner in relation to the employment.

(3) In paragraph (1)(b) “relevant avoidance arrangements” means
arrangements the main purpose, or one of the main purposes, of which
is to secure—

(a) that the earner is not treated under paragraph 2 of Schedule 1 as
20falling within the category of employed earner in relation to the
employment, or

(b) that a person is not treated under paragraph 2 or 9(b) or (d) of
Schedule 3 as the secondary Class 1 contributor in respect of
payments of earnings to or for the benefit of the earner in
25respect of the employment.

(4) Paragraph (5) applies if—

(a) a person (“P”) enters into arrangements the main purpose, or
one of the main purposes, of which is to secure that P is not
treated under a relevant provision as the secondary Class 1
30contributor in respect of payments of earnings to or for the
benefit of an employed earner in respect of an employment, and

(b) but for paragraph (5), no person who is resident or present or
has a place of business in Great Britain would—

(i) be the secondary Class 1 contributor in respect of such
35payments, or

(ii) be treated, under a provision other than paragraph 2(a)
or (b) or 9(g) or (h) in column (B) of Schedule 3, as the
secondary Class 1 contributor in respect of such
payments.

(5) 40If P is resident or present or has a place of business in Great Britain, P
is to be treated as the secondary Class 1 contributor in respect of such
payments.

(6) In paragraph (4)(a) a “relevant provision” means any provision of—

(a) paragraph 2 of Schedule 3, other than sub-paragraphs (a) and
45(b) of that paragraph in column (B), or

(b) paragraph 9(a) to (d) of that Schedule.

(7) In this regulation “arrangements” include any scheme, transaction or
series of transactions, agreement or understanding, whether or not
legally enforceable, and any associated operations.”

(2) In the Social Security (Categorisation of Earners) Regulations (Northern
5Ireland) 1978 (S.R. (NI) 1978 No. 401(NI) 1978 No. 401) (“the 1978 NI regulations”), after
regulation 5 insert—

“5A Anti-avoidance

(1) Paragraph (2) applies if—

(a) an earner has an employment in which the earner personally
10provides services to a person who is resident or present or has
a place of business in Northern Ireland,

(b) a third person enters into relevant avoidance arrangements, and

(c) but for paragraph (2), the earner would not be, and would not
be treated as falling within the category of, an employed earner
15in relation to the employment.

(2) The earner is to be treated as falling within the category of an employed
earner in relation to the employment.

(3) In paragraph (1)(b) “relevant avoidance arrangements” means
arrangements the main purpose, or one of the main purposes, of which
20is to secure—

(a) that the earner is not treated under paragraph 2 of Schedule 1 as
falling within the category of employed earner in relation to the
employment, or

(b) that a person is not treated under paragraph 2 or 7(b) or (d) of
25Schedule 3 as the secondary Class 1 contributor in respect of
payments of earnings to or for the benefit of the earner in
respect of the employment.

(4) Paragraph (5) applies if—

(a) a person (“P”) enters into arrangements the main purpose, or
30one of the main purposes, of which is to secure that P is not
treated under a relevant provision as the secondary Class 1
contributor in respect of payments of earnings to or for the
benefit of an employed earner in respect of an employment, and

(b) but for paragraph (5), no person who is resident or present or
35has a place of business in Northern Ireland would—

(i) be the secondary Class 1 contributor in respect of such
payments, or

(ii) be treated, under a provision other than paragraph 2(a)
or (b) or 7(g) or (h) in column (B) of Schedule 3, as the
40secondary Class 1 contributor in respect of such
payments.

(5) If P is resident or present or has a place of business in Northern Ireland,
P is to be treated as the secondary Class 1 contributor in respect of such
payments.

(6) 45In paragraph (4)(a) a “relevant provision” means any provision of—

(a) paragraph 2 of Schedule 3, other than sub-paragraphs (a) and
(b) of that paragraph in column (B), or

(b) paragraph 7(a) to (d) of that Schedule.

(7) In this regulation “arrangements” include any scheme, transaction or
series of transactions, agreement or understanding, whether or not
legally enforceable, and any associated operations.”

(3) In section 2 of SSCBA 1992 (categories of earner), after subsection (2) insert—

“(2ZA) 5Regulations under subsection (2)(b) may make provision treating a
person (“P”) as falling within one or other of the categories of earner in
relation to an employment where arrangements have been entered into
the main purpose, or one of the main purposes, of which is to secure—

(a) that P is not treated by other provision in regulations under
10subsection (2)(b) as falling within that category of earner in
relation to the employment, or

(b) that a person is not treated as the secondary contributor in
respect of earnings paid to or for the benefit of P in respect of the
employment.

(2ZB) 15In subsection (2ZA) “arrangements” include any scheme, transaction or
series of transactions, agreement or understanding, whether or not
legally enforceable, and any associated operations.”

(4) In section 7 of SSCBA 1992 (“secondary contributor”), after subsection (2)
insert—

“(2A) 20Regulations under subsection (2) may make provision treating a person
as the secondary contributor in respect of earnings paid to or for the
benefit of an earner if arrangements have been entered into the main
purpose, or one of the main purposes, of which is to secure that the
person is not so treated by other provision in regulations under
25subsection (2).

(2B) In subsection (2A) “arrangements” include any scheme, transaction or
series of transactions, agreement or understanding, whether or not
legally enforceable, and any associated operations.”

(5) In section 2 of SSCB(NI)A 1992 (categories of earner), after subsection (2)
30insert—

“(2ZA) Regulations under subsection (2)(b) may make provision treating a
person (“P”) as falling within one or other of the categories of earner in
relation to an employment where arrangements have been entered into
the main purpose, or one of the main purposes, of which is to secure—

(a) 35that P is not treated by other provision in regulations under
subsection (2)(b) as falling within that category of earner in
relation to the employment, or

(b) that a person is not treated as the secondary contributor in
respect of earnings paid to or for the benefit of P in respect of the
40employment.

(2ZB) In subsection (2ZA) “arrangements” include any scheme, transaction or
series of transactions, agreement or understanding, whether or not
legally enforceable, and any associated operations.”

(6) In section 7 of SSCB(NI)A 1992 (“secondary contributor”), after subsection (2)
45insert—

“(2A) Regulations under subsection (2) may make provision treating a person
as the secondary contributor in respect of earnings paid to or for the

benefit of an earner if arrangements have been entered into the main
purpose, or one of the main purposes, of which is to secure that the
person is not so treated by other provision in regulations under
subsection (2).

(2B) 5In subsection (2A) “arrangements” include any scheme, transaction or
series of transactions, agreement or understanding, whether or not
legally enforceable, and any associated operations.”

(7) Subsections (1) and (2)—

(a) are to be treated as having come into force on 6 April 2014 for the
10purposes of inserting regulation 5A(1) to (5), (6)(a) and (7), and

(b) come into force for the purposes of inserting regulation 5A(6)(b) on the
day on which this Act is passed.

(8) Paragraphs (4) and (5) of regulation 5A have effect in relation to arrangements
entered into on or after 6 April 2014 the main purpose, or one of the main
15purposes of which, is to secure that a person is not treated, under a provision
mentioned in paragraph (6)(b) of that regulation, as the secondary Class 1
contributor in respect of payments of earnings to or for the benefit of an
employed earner in respect of an employment.

(9) But regulation 5A(5) only applies as a result of arrangements mentioned in
20subsection (8) in relation to payments of earnings that are made on or after the
day on which this Act is passed.

(10) In subsections (7) to (9) references to regulation 5A are to regulation 5A—

(a) inserted by subsection (1) into the 1978 GB regulations;

(b) inserted by subsection (2) into the 1978 NI regulations.

(11) 25The amendments made by subsections (1) and (2) are without prejudice to any
power to make regulations amending or revoking the provision inserted.

General

6 HMRC administrative expenses: financial provision

(1) In section 165 of SSAA 1992 (adjustments between the National Insurance Fund and
30Consolidated Fund)—

(a) in subsection (5)(a), for the words from “other” to “Act 2014” substitute
“relevant legislation”;

(b) after subsection (5A) insert—

“(5B) In subsection (5)(a) “relevant legislation” means—

(a) 35legislation relating to ordinary statutory paternity pay,
additional statutory paternity pay or statutory adoption pay,

(b) the National Insurance Contributions Act 2014, or

(c) the National Insurance Contributions (No. 2) Act 2014.”

(2) In section 145 of SSA(NI)A 1992 (adjustments between the National Insurance Fund
40and Consolidated Fund)—

(a) in subsection (5)(a), for the words from “other” to “Act 2014” substitute
“relevant legislation”;

(b) after subsection (5A) insert—

“(5B) In subsection (5)(a) “relevant legislation” means—

(a) legislation relating to ordinary statutory paternity pay,
additional statutory paternity pay or statutory adoption pay,

(b) the National Insurance Contributions Act 2014, or

(c) the National Insurance Contributions (No. 2) Act 2014.”

7 5Abbreviations of Acts

In this Act—

• “CRCA 2005” means the Commissioners for Revenue and Customs Act
  2005;

• “FA”, followed by a year, means the Finance Act of that year;

• 10“JA 1995” means the Jobseekers Act 1995;

• “PA 2014” means the Pensions Act 2014;

• “SSAA 1992” means the Social Security Administration Act 1992;

• “SSA(NI)A 1992” means the Social Security Administration (Northern
  Ireland) Act 1992;

• 15“SSCBA 1992” means the Social Security Contributions and Benefits Act
  1992;

• “SSCB(NI)A 1992” means the Social Security Contributions and Benefits
  (Northern Ireland) Act 1992;

• “SSC(TF)A 1999 means the Social Security Contributions (Transfer of
  20Functions, etc) Act 1999;

• “TMA 1970” means the Taxes Management Act 1970;

• “WRA 2007” means the Welfare Reform Act 2007;

• “WRA 2012” means the Welfare Reform Act 2012.

8 Short title and extent

(1) 25This Act may be cited as the National Insurance Contributions (No. 2) Act 2014.

(2) Subject to subsection (3), this Act extends to England and Wales, Scotland and
Northern Ireland.

(3) An amendment, repeal or revocation made by this Act has the same extent as
the provision amended, repealed or revoked.

SCHEDULES

Section 1

SCHEDULE 1 Reform of Class 2 contributions

SSCBA 1992

1 5SSCBA 1992 is amended as follows.

2 In section 1 (outline of contributory system), in subsection (2)(c), omit
“weekly”.

3 For section 11 (liability for Class 2 contributions) substitute—

“11 Class 2 contributions

(1) 10This section applies if an earner is in employment as a self-employed
earner in a tax year (the “relevant tax year”).

(2) If the earner has relevant profits of, or exceeding, the small profits
threshold, the earner is liable to pay Class 2 contributions for the
relevant tax year at the rate of £2.75 in respect of each week in that
15year that the earner is in the employment.

(3) “Relevant profits” means profits, from the employment, in respect of
which Class 4 contributions are payable under section 15 for the
relevant tax year (or would be payable if the amount of the profits
were to exceed the amount specified in subsection (3)(a) of that
20section in excess of which the main Class 4 percentage is payable).

(4) The “small profits threshold” is £5,885.

(5) Class 2 contributions under subsection (2) are to be payable in the
same manner that Class 4 contributions in respect of relevant profits
are, or would be, payable (but see section 11A for the application of
25certain provisions in relation to such Class 2 contributions).

(6) If the earner does not have relevant profits of, or exceeding, the small
profits threshold, the earner may pay a Class 2 contribution of £2.75
in respect of any week in the relevant tax year that the earner is in the
employment.

(7) 30No Class 2 contributions are to be paid under this section in respect
of any week in the relevant tax year—

(a) before that in which the earner attains the age of 16, or

(b) after that in which the earner attains pensionable age.

(8) The Treasury may by regulations make provision so that, in relation
35to an earner, the Class 2 contribution in respect of a week is higher
than that specified in subsections (2) and (6) where—

(a) in respect of any employment of the earner, the earner is
treated by regulations made under section 2(2)(b) as being a
self-employed earner, and

(b) in any period or periods the earner has earnings from that
5employment and—

(i) those earnings are such that (disregarding their
amount) the earner would be liable for Class 1
contributions in respect of them if the earner were not
so treated in respect of the employment, and

(ii) 10no Class 4 contribution is payable in respect of the
earnings by virtue of regulations under section 18(1).

(9) The Treasury may by regulations—

(a) modify the meaning of “relevant profits”;

(b) provide that Class 2 contributions under subsection (6) may
15not be paid—

(i) if the employment or the earner is of a prescribed
description, or

(ii) in prescribed circumstances.

(10) Regulations under subsection (9)(a) may amend this section.

(11) 20Regulations under subsection (9)(b) are to be made with the
concurrence of the Secretary of State.

11A Application of certain provisions of the Income Tax Acts in relation to
Class 2 contributions under section 11(2)

(1) The following provisions apply, with the necessary modifications, in
25relation to Class 2 contributions under section 11(2) as if those
contributions were income tax chargeable under Chapter 2 of Part 2
of the Income Tax (Trading and Other Income) Act 2005 in respect of
profits of a trade, profession or vocation which is not carried on
wholly outside the United Kingdom—

(a) 30Part 2 (returns), Part 4 (assessment and claims), Part 5
(appeals), Part 5A (payment of tax), Part 6 (collection and
recovery) and Part 10 (penalties) of the Taxes Management
Act 1970;

(b) sections 101 and 102 of the Finance Act 2009 (interest);

(c) 35Schedules 55 and 56 to that Act (penalties for failure to make
returns etc or for failure to make payments on time);

(d) Part 4 (follower notices and accelerated payments) and Part 5
(promoters of tax avoidance schemes) of the Finance Act
2014;

(e) 40any other provisions of the Income Tax Acts as to assessment,
collection, repayment or recovery.

(2) But section 59A of the Taxes Management Act 1970 (payments on
account) does not apply in relation to Class 2 contributions under
section 11(2).

(3) 45This section and section 11(5) are subject to any contrary provision in
regulations made under Schedule 1 in relation to Class 2
contributions under section 11(2).”

4 (1) Section 12 (late paid Class 2 contributions) is amended as follows.