NIM01578 - Class 1 Structural Overview: zero-rate of secondary NICs for Freeport employees: examples: Example 8 – Substantial change in employee’s working arrangements which starts a qualifying period after the employment started

Example 8 – Substantial change in employee’s working arrangements which starts a qualifying period after the employment started – zero rate of Secondary NICs payable for less than 36 months

An employee starts an employment on 1 September 2023. The employer has business premises within the Freeport tax site but for the first 3 months of employment they require employees to undertake training in a location outside of the Freeport tax site. For the period of training the employer cannot claim the zero-rate of secondary NICs for Freeport employees in respect of the employee’s earnings as, at the start of the qualifying period (the start of the employment), the employer did not reasonably expect that the employee would spend 60% of their working time in the Freeport tax site.

On 1 December 2023 the employee has successfully completed their training and as required under their contract of employment, starts work in the employer’s premises in the Freeport tax site. This is a substantial change in the employee’s working arrangements and starts a qualifying period for the zero-rate of secondary NICs for Freeport employees in respect of the employee’s earnings. The employer reasonably expects the employee to spend 60% of their working time working at the employer’s Freeport business premises, so provided all the qualifying conditions are met, they are now able to claim the relief for this employee from 1 December 2023.

The relief is only available to claim for each employee for a three-year period which starts on the day the employment begins, not on the date the employee moves into the freeport tax site. In this example the employment started on 1 September 2023, so the relief can only be claimed in relation to earnings paid to the employee for a maximum of 33 months from 1 December 2023 to end of November 2026, on the assumption that the conditions to claim the relief continue to be met until the end of November 2026.