National Insurance for employers of people working abroad
Introduction
About these pages
These pages:
- gives information for employers of employees working abroad in a country:
- outside the European Economic Area (EEA) or
- with which the United Kingdom (UK) does not have a reciprocal agreement
- gives general information for employers of employees working abroad in a country:
- in the EEA or
- with which the UK has a reciprocal agreement.
The booklet supplements leaflet CWG2 Employer’s Further Guide to PAYE and NICs.
This booklet does not cover all occupations. There are special National Insurance arrangements for:
- Mariners - See leaflet CA24 National Insurance contributions for masters and employers of mariners
- People sent to work abroad by an agency - See leaflet CA25 National Insurance contributions for agencies and people finding work through agencies
- Cabin crews of civil aircraft - Write to the Inland Revenue at the address here for more information
Employees working in a country not covered by European Community (EC) Regulations or reciprocal agreements
When are Class 1 contributions payable?
There is a legal requirement for an employer to pay Class 1 National Insurance contributions, on all earnings paid during the first 52 weeks an employee is working abroad, provided the following three conditions are satisfied:
- the employer has a place of business in the UK (see below for an explanation of this condition) and
- the employee is ordinarily resident in the UK (see here for an explanation of this condition) and
- the employee was resident in the UK immediately before starting the employment abroad.
If all three conditions are satisfied, Class 1 contributions are payable at normal rates on all earnings (including overseas allowances) paid within the 52 weeks beginning with the week the employment abroad begins.
An employer can be said to have a place of business in the UK if the employer occupies premises:
- of which, or part of which, they are the lawful tenant or occupier and
- where the employee(s) or agent(s) carry out any activity in the UK which furthers the employer’s business. The activity does not need to be remunerative in itself.
A business incorporated or registered as having a place of business in the UK under the Companies Act, or in Northern Ireland the Companies (Northern Ireland) Orders, will normally be regarded as having a place of business in the UK.
Important Note:
If an employee is seconded from the UK to an overseas associate or subsidiary, there may be a change of liability.
If the employee’s contract of service is transferred from the UK employer, there will no longer be any liability on the UK employer.
If the overseas associate or subsidiary has a place of business in the UK, there will be a liability on the overseas employer.
A person is ordinarily resident in a particular country if the person:
- normally lives there, apart from temporary or occasional absences and
- has a settled and regular mode of life there.
A person may be ordinarily resident in a place from which they are temporarily absent and in some circumstances may be ordinarily resident in two places at once.
Whether a person who goes abroad remains ordinarily resident in the UK depends on individual circumstances. The following are some of the points which should be taken into account (the list is not exhaustive):
Will the person be returning to the UK from time to time during the period of employment abroad?
If yes, how often and for how long? The more frequent, or longer the returns, the more likely that ordinary residence continues.
What will be the purpose of return visits?
Visits to family who have remained at the person’s home in the UK, and/or holidays spent at home in the UK, would indicate continued ordinary residence.
Visits solely for the purpose of carrying on duties incidental to the work overseas (eg for briefing, or training or to make a report), would not be such a strong indication.
Will the partner and/or children, if any, also go abroad during the overseas employment?
If so, it is more likely that ordinary residence status will not be maintained, especially if they do not retain a home in the UK, or make occasional visits to the UK.
Will a home be maintained in the UK during the absence?
If not, it is less likely that ordinary residence will be retained.
If a home is maintained, will it be available for their use on return?
If not, it is less likely that ordinary residence status will be retained, eg it has been rented on a long let.
Has the person lived in the UK for a substantial period?
If so, and the longer the period, the more likely that ordinary residence status will be maintained despite the period of employment abroad.
Will the person be returning to the UK at the end of the period of employment abroad?
If so, and the earlier the return, the more likely that ordinary residence status will be maintained in the UK.
We will consider the circumstances of individual cases should you wish. Write to your nearest Inland Revenue (National Insurance Contributions) office giving as much information as possible based on the guidelines given above.
When are Class 1 contributions not payable?
If any one of the three conditions mentioned on page 3 is not satisfied:
- there is no liability to pay Class 1 contributions
- the employee may have the right to pay voluntary Class 2 or 3 contributions to maintain their National Insurance record and qualify for certain benefits.
Further information can be found in leaflet NI38, Social Security abroad, which is obtainable from any Inland Revenue or Social Security office.
An employee who needs detailed advice should write to the Inland Revenue at the address shown here, giving their full name, date of birth, National Insurance number, UK address and address abroad.
What is the Class 1 contributions liability for people abroad?
Where Class 1 contributions have to be paid, the contribution rate for employees abroad is the same as that for employees in the UK.
Example:
If your employee is contracted-out as a member of your approved occupational pension scheme, the contributions will be payable at the same contracted-out rate as that at which they would be payable if the employee were working in the UK.
The contributions are assessed on the gross earnings (including any overseas allowances) paid in the relevant earnings period during the 52 week period of liability.
If the employee’s earning period is:
- weekly, contributions must continue to be paid for 52 weeks from and including the week employment abroad started
- longer than weekly, contributions will end with the last payment made before the 53rd week of the employment abroad.
Earnings in foreign currency
In cases where earnings are paid wholly or partly in foreign currency, the amount of the Class 1 contribution should be based on:
- the sterling equivalent of the earnings in the foreign currency at the date of payment of the earnings and
- the amount of any part of the earnings which are paid in sterling.
Recording calculations
Contributions should be recorded on the employee’s Deductions Working Sheet P11 or substitute and paid to the Collector of Taxes (Accounts Office) in the usual way.
If liability for payment of contributions continues into a tax year in which no tax is to be recorded, a Deductions Working Sheet should still be set up for that year to record the earnings and contributions paid.
On the Deductions Working Sheet:
- endorse the tax code space ‘NI’
- record Class 1 contributions
- do not record any Class 2 or 3 contributions which an employee is paying voluntarily.
What happens when the liability for Class 1 contributions ends?
When Class 1 liability ends, if an employee abroad wants information about their National Insurance position, advise them to write to the Inland Revenue at the address here.
They must give:
- their full name
- National Insurance number
- overseas address
- date of departure and
- the period for which Class 1 contributions were paid.
The Inland Revenue will then send the employee information about their National Insurance position during their absence abroad and on their return.
Send the employee’s end-of-year return to the Inspector of Taxes
at the end of the tax year in the usual way.
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