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National Insurance Contributions - Help

National Insurance Contributions - Help

Old Jun 2nd 2014, 6:57 pm
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Default National Insurance Contributions - Help

Hi Folks

Has anyone had a similar experience
Just had a tax brief from EY via my company who advise me that because my wife is not coming straight out and she will be living in our rented house in the UK, then I have to pay full Class 1 contributions for 52 weeks.

She stated that I will be classed as an 'Ordinarily Resident' of the UK and will return 'occasionally' to visit family, despite having a permanent position in AD, where upon my wife will join me once I've completed my role as the pathfinder.

They stated that there are three conditions in which if you meet any of these then you are eligible to pay UK class 1 contributions at the top rate.

your employer has a place of business in the UK, and

you are ordinarily resident in the UK, and

immediately before starting the employment abroad you were resident in the UK.
This seems that we are in a catch 22 position here.
My company has its HQ in the UK but the ME section is a separate entity for everything.

Has anyone else had experience of this and/or advice.
I've done the HMRC hotlines to death now and each time a different answer to the identical questions and circumstances.

Anyone?

Massive thanks in advance

Last edited by Buzz126; Jun 2nd 2014 at 8:51 pm.
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Old Jun 3rd 2014, 2:31 am
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Default Re: National Insurance Contributions - Help

Your employer is in UK hence you have to pay full NI for the first 52 weeks thereafter you can pay voluntary contributions.
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Old Jun 3rd 2014, 2:59 am
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Default Re: National Insurance Contributions - Help

I was in a very similar position and despite the HMRC people themselves accepting that I was working and being paid overseas I still had to pay. The reason being that my company were worried that they would/could be dragged to court because they'd failed to take NI from my wages.
Just as an additional sting I had already paid more than 35 years so continued payment gives me no additional benefit.
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Old Jun 3rd 2014, 9:24 am
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Default Re: National Insurance Contributions - Help

Not gonna say that's not the case but I have my doubts. Is this not similar to the situation with PAYE where HMRC "determines" your liability and issues a tax code which your employer, under PAYE, would use to adjust deductions? So in the case of N.I. then HMRC sets the contribution rate from which your employer makes the necessary witholding.

I suppose there might be a difference in that with tax if your employer fails to deduct it then HMRC will come after you for it but in the case of N.I. you might need to go after your employer if they had failed to make sufficient contributions.
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Old Jun 3rd 2014, 11:43 am
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Default Re: National Insurance Contributions - Help

The situation is that UK employers are required to make the NI payments for the first 52 weeks. The only exception (which is subjective) is if you have broken all ties with UK. The company will not take the trouble or risk of pursuing exemptions. Furthermore they will not take the risk of being stuck with having to pay your NI contributions if you throw in the towel after 40 weeks. The company may give different excuses, but in general if you work overseas for a UK employer you will pay NI for the first 52 weeks.
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Old Jun 4th 2014, 1:17 am
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Default Re: National Insurance Contributions - Help

The key word is "eligible" and not "required".

If you are already a non resident for tax purposes then you do not have to pay class 1 contributions. You can if you want to (i.e. you are eligible to) but you don't have to. You can elect to pay voluntary contributions.

A stern Email to your dozy HR department seems in order.
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Old Jun 4th 2014, 3:07 am
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Default Re: National Insurance Contributions - Help

Originally Posted by hong_konger
If you are already a non resident for tax purposes then you do not have to pay class 1 contributions.
A stern Email to your dozy HR department seems in order.
As already explained by me and gottheteeshirt the HR Depts are the ones insisting on payment.
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Old Jun 4th 2014, 3:37 am
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Default Re: National Insurance Contributions - Help

Originally Posted by hong_konger
The key word is "eligible" and not "required".

If you are already a non resident for tax purposes then you do not have to pay class 1 contributions. You can if you want to (i.e. you are eligible to) but you don't have to. You can elect to pay voluntary contributions.

A stern Email to your dozy HR department seems in order.
I do not believe so - if you work for a UK based company you are required to pay class 1 NI for the first 52 weeks. The HMRC non resident rules for tax are not the same as for NI. You will complete and get a NT code for tax, but you will still need to pay NI for the first 52 weeks. You can only avoid paying NI if you can convince everyone that you have emigrated and broken all ties with UK, a bit difficult when you are working for a UK company. You need to terminate your contract with UK and take a new contract with the overseas company assuming that they are fully registered as an overseas company and not as a branch of the UK company.
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Old Jun 4th 2014, 8:16 am
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Default Re: National Insurance Contributions - Help

Buzz, I was in much the same position as you. Paid full NI for the first 52 weeks, then got it refunded--all legit.
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Old Jun 4th 2014, 8:26 am
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Default Re: National Insurance Contributions - Help

Originally Posted by Bahtatboy
Paid full NI for the first 52 weeks, then got it refunded--all legit.
How did you manage to get a refund? My parent company are UK based (SERCO) but my contract is in the ME and I'm paid in the ME. I got my non residency tax certificate from HMRC so no issues with income tax. I wrote to them about NI, explaining my circumstances, and I got a letter back stating that I was not required to pay it. However even after sending that letter to HR and arguing with them HR still took the NI for 52 weeks. Their concern being their liability under UK law. As gottheTshirt said "The company will not take the trouble or risk of pursuing exemptions. Furthermore they will not take the risk of being stuck with having to pay your NI contributions if you throw in the towel after 40 weeks. The company may give different excuses, but in general if you work overseas for a UK employer you will pay NI for the first 52 weeks."

I would love to have a refund as it's not a small amount (to me).
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Old Jun 4th 2014, 9:13 am
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Default Re: National Insurance Contributions - Help

I'm guessing you filled in the questionaire from SERCO HQ. This was the answer HR provided:
"I’ve reviewed your questionnaire and under normal rules we would determine that your have remained resident for NIC purposes but not for income tax purposes. With this in mind the NT code has been applied meaning income tax will not be deducted going forward but we need to look into your NIC position.

I understand from the attached information that HMRC have determined your residence for NIC purposes to be non resident.

The reason that Serco have come to the conclusion that the NIC due is down to your connections to the UK. Residence for NIC is not the same as for income tax, there are three tests which must be met for an individual to remain resident for NIC purposes.

· The employer has a place of business in the UK. (This will be satisfied for all employees in the Dubai entity even if they were not previously employed by Serco UK. This is because Serco Dubai is not a separate legal entity from the UK)

· The individual is ordinarily resident in the UK. (This could apply which is the reason for the questionnaire)
•Immediately before starting the employment abroad they were resident in the UK. (This could apply, again this is the reason for the questionnaire)

Unfortunately HMRC do not appear to be aware that the Dubai entity is not a separate legal entity from the UK. Because of this HMRC are sometimes advising our Dubai employees that NIC is not due for the 52 weeks as HMRC feel that the first test (place of business in the UK) is not met, therefore exempting the individual from the 52 week contribution.

As explained above, this is incorrect and would therefore mean the statement issued by HMRC would be invalid if they have based their decision on this assumption.

If HMRC have made the discussion based upon the second test (ordinarily resident in the UK), your residence for NIC is linked to your ties to the UK. You have answered the questionnaire advising that your family have remained in the UK, you have a property readily available for your use when you return to the UK and you intend to return to the UK for visits and in the future.

With these links to the UK HMRC would normally class an individual as resident for NIC purposes. This would mean that the 52 week payment of NIC would be due. I have seen in the past that HMRC have classed individuals with fewer connections to the UK as resident for NIC purposes.

I understand that you have informed HMRC of the exact information that you provided to Serco, therefore I feel that we might have misunderstood your intentions/current position. Can you confirm that the above is correct as per my understanding.

If it is, I will need to refer to the employment tax manager who signed our agreement that the 52 week NIC payment is due in your case. Unfortunately it is not a straight forward process of removing the need to pay UK NIC. It is an employers responsibility to ensure that the correct NIC is deducted from an individuals salary. If the NIC is incorrectly deducted HMRC can impose large penalties on Serco. This could be the case even if HMRC have provided the instructions as they were not fully aware of the business structure/your links to the UK."
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Old Jun 4th 2014, 11:58 am
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Default Re: National Insurance Contributions - Help

I think what SERCO says sums it up. Nearly all UK based companies (all those I have been involved with) will deduct NI contributions for the first 52 weeks.

http://www.hmrc.gov.uk/nic/work/out-ee-area.htm
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Old Jun 4th 2014, 3:20 pm
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Default Re: National Insurance Contributions - Help

Originally Posted by mikewot
How did you manage to get a refund? My parent company are UK based (SERCO) but my contract is in the ME and I'm paid in the ME. I got my non residency tax certificate from HMRC so no issues with income tax. I wrote to them about NI, explaining my circumstances, and I got a letter back stating that I was not required to pay it. However even after sending that letter to HR and arguing with them HR still took the NI for 52 weeks. Their concern being their liability under UK law. As gottheTshirt said "The company will not take the trouble or risk of pursuing exemptions. Furthermore they will not take the risk of being stuck with having to pay your NI contributions if you throw in the towel after 40 weeks. The company may give different excuses, but in general if you work overseas for a UK employer you will pay NI for the first 52 weeks."

I would love to have a refund as it's not a small amount (to me).
I was paid by the UK parent company of the UAE company I was working for in UAE. NI deductions were made for the first 52 weeks, after which they stopped and shortly after that HMRC (I think) made the refund to me. The UK company was used to the arrangement, but then so should SERCO be I would imagine.
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Old Jun 5th 2014, 12:23 am
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Default Re: National Insurance Contributions - Help

Originally Posted by gottheTshirt
I think what SERCO says sums it up. Nearly all UK based companies (all those I have been involved with) will deduct NI contributions for the first 52 weeks.

http://www.hmrc.gov.uk/nic/work/out-ee-area.htm
Yes they will unless you explain to them your situation so they can communicate that to the IRD to get approval not to deduct class 1.

Last edited by hong_konger; Jun 5th 2014 at 12:27 am.
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Old Jun 5th 2014, 11:37 am
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Default Re: National Insurance Contributions - Help

I transferred out from the ABZ office to the AUH office, no-one mentioned anything about class 1 contributions, I just filled in a P85 and jumped on a plane?
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