NI on Non-executive director's fees

[Rebecca Cave]

Does the fee paid to a pure non-exe director ( no ohter work forcompany performed) always have to suffer class 1 NI as the non-exe is an office holder and is defined as an 'employed earner'? Or if the fee is self-employed income for tax purposes is it also subject to class 2 and 4 for NI purposes?

I have read the relevant bits of Peter Arrowsmith's book: Tolley's NIC annual 2004-05, and the bits I can find in the IR manuals concerning non-executives but I am still confused. Do companies in practice pay non-executive directors fees gross, with no tax or NI deducted and run the risk of the IR demanding NI for past years, where no income tax is due? Please can someone clarify.

[Simon Sweetman]

ESM3268 says this - "Office-holders are caught by the National Insurance regulations. This is because these regulations apply where an individual would have been an "employed earner" of the third party if there had been a direct contract. The term "employed earner" includes a person who is gainfully employed in the United Kingdom in an office with emoluments/earnings chargeable to tax under Schedule E/as employment income. This will include a non-executive director whose remuneration would be taxed under Schedule E/employment income if the intermediary did not exist."

As the Schedule D treatment of fees is concessional I suspect that the law will apply to NIC.