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United Kingdom: National Insurance Contributions for Internationally Mobile Workers

By - - Social Security Contributions

The UK Tax Authority (HMRC) has published helpful guidance on the National Insurance Contributions (NIC) that employers should be withhold on earnings paid to Internationally Mobile Employees (IMEs).   

Who are IMEs?

HMRC regards as potential IMEs, employees who:

  • live in the UK but work overseas;
  • come from overseas for periods of work in the UK;
  • are UK or overseas residents who move in and out of the UK for work; OR
  • may work in several countries and have an employer based overseas.
When Should Employers Withhold NIC? 

Employers usually withhold NICs from the remuneration payment to the employee. However, there are some complexities where the employer has to decide whether to withhold:

  • Some payments may be made later and possibly after the IME has left the UK – such as a bonus calculated later.
  • IMEs who are new to the UK may be NIC exempt, for the first 52 weeks. 

HMRC now states, as clarification, that NICs should be calculated by reference to the actual period the remuneration was earned and then apportioned accordingly, between the UK and the overseas countries.  

This contrasts with the common practice of many employers to date, which was to withhold NIC or not based on employee’s location at date of payment.   

From When does this Clarification Apply?

As HMRC considers this a clarification rather than a change in rules, employers are expected to review payrolls going back 6 years.  Where an NIC underpayment is found, HMRC will pursue recovery. A corresponding 6-year recovery period applies for the employer to recover an underpayment from the employee.  On the other hand, overpayments should be recoverable from HMRC.

Employer Action

Employers should:

  • Identify IMEs working within their organisation in the last 6 years.
  • Review related documentation to ensure it adequately protects the employer’s interests when working with IMEs.
  • Review 6 years’ IME payrolls, to identify any under or over payments of NIC in the period under the new guidelines.  You will be required to pay underpayments to HMRC or set them off against any overpayments.
  • Where there is an underpayment, consider what options there are to recover the NIC due from the IME.  

This is a high-level general update only. Legal advice should be obtained on specific circumstances.
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