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NIC for migrant worker rules in the EEA - Exceptions to the basic rule

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In his latest blog post, Alan Boby of UK200Group member firm Ellacotts LLP examines the exceptions to the national insurance contribution (NIC) rules for migrant workers.

In a post-Brexit world we will need to know how the tax rules change for people moving across our borders. One example is social security but, of course the existing system will continue for some time yet. The current national insurance contribution (NIC) rules normally require employers to make NIC payments on remuneration paid to UK workers. However, there are three exceptions to the basic ‘pay where you work’ rule for employees who:

1.were posted to a member state other than the member state where they normally worked for a period of, generally, less than 24 months;

2.were employed in international transport in the territory of two or more member states; or

3.normally pursued their activities in two or more member states.

It is worth focusing on the first exception as this is a more common occurrence.

Temporary overseas assignments – up to 24 months

The NIC regulations state:

‘A person employed in the territory of a Member State (the source state) by an undertaking to which he is normally attached who is posted by that undertaking to the territory of another Member State to perform work there for that undertaking shall continue to be subject to the legislation of the first Member State, provided that the anticipated duration of that work does not exceed 24 months and that:

• he is not sent to replace another person who has completed his term of posting, and
• the posting employer must normally carry out its activities in the source state.’

Example
A British national, normally resident in the UK, who was sent by his UK employer to work for up to 24 months in France, normally only needs to paid UK NICs throughout his assignment.

The contract of employment has to remain at all times with the home employer before this rule applies, since it is explicitly required that he continued to perform work for that employer. If the home contract is terminated and a host contract substituted, the individual may fall into the host scheme. An error with this process could be an extremely expensive matter for both employers and employees since social security contribution rates vary widely.

Once the 24 months has expired (or earlier if the assignment becomes longer-term) NICs must be paid in the normal way.

Income tax relief

There are similar rules for accommodation and travel expenses paid on behalf of temporarily seconded workers although the relief from income tax is normally claimed by the employees on their personal tax returns.

As with all such tax situations, advice should also be sought before proceeding. For further details call Alan Boby on 01295 250401 or email aboby@ellacotts.co.uk

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