Open consultation

Freeport and Investment Zone employer National Insurance contributions (NICs) reliefs – reporting requirement

Published 18 April 2024

1. Introduction

This consultation explores regulations that make provision in relation to the zero-rate of secondary Class 1 NICs available to businesses located in Freeport or Investment Zone special tax sites in Great Britain.

Employers operating in a Freeport or Investment Zone special tax site can claim a NICs relief, so they do not have to pay any employer NICs on up to £25,000 of the eligible employee’s earnings per year for up to 36 months.

2. The draft regulations

The draft regulations introduce a new reporting requirement for Freeport and Investment Zone employers who claim the NICs reliefs to provide a workplace postcode for every employee they claim the NICs reliefs in respect of.

Guidance on the Freeports and Investment Zones NICs relief can be found on GOV.UK.

One of the eligibility conditions for claiming these reliefs requires employees to be expected to spend 60% of their working time in the Freeport or Investment Zone special tax site. Exceptions apply where adjustments to working patterns have been made to accommodate the protected characteristics of pregnancy and maternity and disability.

These reliefs are claimed by the employer through their payroll software by applying the relevant Freeport or Investment Zone NICs category letter in their Full Payment Submission (FPS) to HMRC.

These regulations make provision that employers who claim either the Freeports or Investment Zones NICs relief, must report an employee workplace postcode to HMRC as part of their FPS return, in respect of an employee they claim the NICs relief for.

The postcode to be provided on the FPS, will need to be the postcode in the special tax site where the eligible employee is expected to spend at least 60% of their working time. This is information the employer should readily hold as it underpins eligibility to the relief and therefore should be possible to provide at the point of claiming the relief.

The requirement to provide the employee’s workplace location at the point at which they claim the reliefs will encourage employers to check eligibility at the point of claim, reducing employer errors from the outset.

The location information will also support HMRC in assuring validity of claims without generally having to contact the employer, enabling data driven compliance activity.

The draft amendments will:

• introduce a new reporting requirement for Freeport and Investment Zone employers who claim the Freeport or Investment Zones NICs reliefs

• add a requirement for employers who are claiming the Freeport and Investment Zone NICs reliefs in respect of employees who work in the special tax sites, to include the postcode for the address at which the employee works in their FPS return

• where an employee has an adjustment for the protected characteristics of disability, pregnancy and maternity and does not need to meet the 60% working time requirement to be eligible for the reliefs, the employer must still provide in their FPS return, the postcode for the address at which the employee works in the special tax site or would work except for the adjustment made to accommodate the protected characteristic

Question 1: Do the amendments meet the stated policy aims?

Question 2: Will these changes cause any reporting difficulties for Freeport and Investment Zone employers who claim these NICs reliefs and their agents?

Question 3: Will these changes produce any other consequences for Freeport and Investment Zone employers who claim these NICs reliefs and their agents, or for payroll software developers?

3. Next steps

Secondary legislation confirming the measure is intended to be brought forward in due course, with the measure intended to take effect from 6 April 2025.

4. How to respond to this consultation

This consultation opened on 18 April 2024 and will close on 15 May 2024.

Any issues for employers and payroll software providers in operating the changes set out in the draft amendment regulations should be sent to nics.correspondence@hmrc.gov.uk.