This note explains some changes that will come into force on 28 June 2012 and which will be of particular interest to some airlines and aircrew as it concerns the payment of Social Security contributions such a National Insurance.
EC Regulation 883/2004 contains mandatory Social Security co-ordination rules that determine which Member State Social Security legislation will apply when a worker moves within the European Economic Area (EEA) or Switzerland to live or work. Airline crew flying around EEA Member States or Switzerland are subject to these rules. The rules have direct effect in the UK and determine when National Insurance contributions have to be paid.
From 28 June 2012 new Regulation 465/2012 will introduce a new 'Home Base' rule to Regulation 883/2004 for determining which Member State aircrew and their employers will pay contributions to.
Under current rules most aircrew will pay contributions to the Member State they live in if they perform a substantial part (25 per cent or more) of their activities there. If they do not perform a substantial part of their activities there then they will pay to the state in which their employer is based. There are only a few exceptions to this.
However, under the new 'Home Base' rule aircrew and their employer will pay contributions to the Member State in which the 'Home Base' is situated. The 'Home Base' is where the crew member normally starts and ends their periods of duty. In most cases this will be in the state they live in.
This means that a crew member with a UK 'Home Base' who is normally employed in the EEA Member states or Switzerland will pay UK Class 1 contributions and be exempt from paying contributions in other states. A crew member with a 'Home Base' in another EEA Member State or Switzerland will have to pay contributions in that country and will be exempt from UK National Insurance.
Some Transitional Arrangements do apply. If a crew member is paying contributions to a state under the current rules, but this would change if the new rule was applied, then they can continue to pay to that state for a transitional period of up to 10 years or until there is a change in their material circumstances if that happens first. A change in material circumstances could be a change of employer, 'Home Base', or Member State of residence.
A crew member can also ask that the new rule be applied to them now. If they have a UK 'Home Base' and now choose to have UK legislation apply to them under the new rule then they should write to HMRC NIC&EO International Caseworker (Opens new window).
Under Article 16 of EC Regulation 883/2004 Member States can to make special agreements to vary the normal rules where this is in the best interests of the worker. If a very strict application of the new rule would harm a crew member's situation because their 'Home Base'often changes, and this would mean them frequently moving between the Social Security legislation of different states, then they or their employer can apply for a special agreement to keep the person subject to the legislation of a single state. A crew member or employer wishing to secure such an agreement should contact HMRC NIC&EO International Caseworker (Opens new window).
For most aircrew there will be no immediate impact on their liability to pay contributions. Employers operating in EEA Member States and Switzerland will need to be aware of the new rule for new employees and also for current crew members who change their material circumstance or choose to be subject to the new rule.
The European Commission has published Regulation 883/2004 and you can view this on their website (Opens new window)
A copy of Regulation 465/2012 was published in the Official Journal of the European Union (PDF 740KB) on 8 June 2012.
Our website guidance will shortly be updated with details of the new rule. In the meantime, advice can be obtained by calling the NIC&EO International Caseworker helpline on 0845 915 4811. If you are phoning from outside the UK dial the International Code then 44 191 203 7010.