Policy paper

National Insurance contributions: clarity for employers whose workers perform duties abroad (Class 1A)

Published 31 October 2016

Who is likely to be affected

This measure clarifies the current position for a small number of employers whose employees perform duties abroad and incur travel costs and expenses. This measure is expected to have a negligible impact on businesses or civil society organisations as the change will reflect the amendment to Schedule 3 of the Social Security (Contributions) Regulations (SSCR) 2001 to ensure Regulation 40 works as intended.

General description of the measure

This is a minor amendment to Regulation 40 of the SSCR, to ensure a cross-reference works as intended. The amendment will update regulation 40 of SSCR to clarify that the following payments are disregarded as general earnings for the purpose of Class 1A National Insurance Contributions (NICs):

• travel between employments where duties performed abroad
• travel costs and expenses where duties performed abroad: earner’s travel
• travel costs and expenses where duties performed abroad: visiting spouse’s [civil partner’s] or child’s travel
• foreign accommodation and subsistence costs and expenses (overseas employments)

Policy objective

This measure is a clarification to ensure that regulation 40 of SSCR works as intended, by updating a cross-reference. There is no change to the policy.

Background to the measure

Regulation 40 of the SSCR provides for prescribed general earnings to be excluded from any charge to Class 1A NICs. This includes certain classes of general earnings that are disregarded in the calculation of earnings for Class 1 NICs purposes by Schedule 3 to the SSCR.

On 6 April 2004 the Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770) amended Schedule 3 to the SSCR.

This amendment provided for certain classes of general earnings to be excluded from any charge to Class 1A NICs. These relate to payments of several categories of expense and costs:

1. travel between employments where duties performed abroad
2. travel costs and expenses where duties performed abroad: earner’s travel
3. travel costs and expenses where duties performed abroad: visiting spouse’s [civil partner’s] or child’s travel
4. foreign accommodation and subsistence costs and expenses (overseas employments)

To effect this change, paragraph 4 of Part VIII to Schedule 3 was amended and paragraphs 4A, 4B, 4C and 4D were inserted into that Schedule.

Regulation 40(2)(b) of the SSCR cross-refers to Schedule 3. However, it currently only contains an exclusion from the charge to Class 1A NICs in respect of general earnings falling within paragraph 4 of Part VIII of Schedule 3. It does not mention sub- paragraphs 4A - D. This update will ensure that regulation 40(2)(b) also cross-references paragraphs 4A - D of that Schedule. This update clarifies that payments relating to points 1 - 4 above should be excluded from any charge to Class 1A NICs.

Detailed proposal

Operative date

The changes made by this measure will have effect from November 2016.

Current law

Current law is included in regulation 40(2)(b) SSCR and this cross-references Part VIII of Schedule 3 to the SSCR.

Part VIII of Schedule 3 to the SSCR was amended by the Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770).

Proposed revisions

Regulations will be made to update paragraph (2)(b) of regulation 40 so that it cross-references paragraphs 4A - D in Part VIII of Schedule 3 to SSCR.

Summary of impacts

Exchequer impact (£m)

2016 to 2017	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021
nil	nil	nil	nil	nil

This measure is not expected to have an Exchequer impact.

Economic impact

This measure is not expected to have any economic impacts. This measure is a clarification and is designed to ensure the legislation implements the policy as announced.

Impact on individuals, households and families

The measure is not expected to impact on individuals, households or family formation, stability or breakdown.

Equalities impacts

It is not anticipated that there will be any impacts on groups with protected characteristics as a result of these changes.

Impact on business including civil society organisations

This measure is expected to have very little impact on businesses or civil society organisations as the change will reflect the amendment to Schedule 3 of the SSCR to ensure Regulation 40 works as intended. A small number of employers whose employees perform duties abroad and incur travel costs and expenses will find this that this measure clarifies the current position.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

As this is a minor technical fix, we will not be carrying out any further monitoring and evaluation in addition to that which is already in place.

Further advice

If you have any questions about this change, please contact Emma Barker on Telephone: 03000 586 778 or email: emma.robinson3@hmrc.gsi.gov.uk.

Declaration

Jane Ellison MP, Financial Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.