Classes of contributions and who pays them

By Tolley in association with Jim Yuill at The Yuill Consultancy
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The following Employment Tax guidance note by Tolley in association with Jim Yuill at The Yuill Consultancy provides comprehensive and up to date tax information covering:

  • Classes of contributions and who pays them
  • Class 1 contributions
  • Class 1A contributions for expatriates
  • Primary only NIC liabilities
  • Obligations placed on foreign employers
  • Voluntary contributions when abroad
  • Class 3A contributions

Class 1 contributions

Class 1 contributions are payable on earnings paid to an employed worker which derive from or are treated as deriving from employed earner’s employment in the UK. There are two kinds of Class 1 contribution, primary contributions for which the employee is liable and secondary contributions which are payable by a ‘secondary contributor’. The secondary contributor is usually the employer, but in some cases as set out below may be another party.

Primary (employee) liability

For a primary liability to arise, the employed earner must be resident or present in the UK at the time of the employment, or ordinarily resident in the UK at that time. The fact that presence in the UK is sufficient to create a contribution liability means that unless an exemption applies, employment in the UK for however short a time will create a contribution liability.

SI 2001/1004, reg 145(1)(a)

Employment in an EU country or in a country with which the UK has a bilateral social security agreement will often require NIC liabilities to continue. In such circumstances, an individual is treated as being resident in the UK.

Secondary (employer) liability

For a secondary liability to arise, the person who would be the secondary contributor must be resident or present in the UK when such contributions become payable, or has a place of business in the UK at that time.

SI 2001/1004, reg 145(1)(b)
Cases where no UK NIC arises

Where an employee is posted to the UK by his home country employer, and by virtue of a social security agreement, he remains in his home country contribution system, there are no UK NIC liabilities to consider. The same applies where an employee is posted from a non-agreement country, is not ordinarily resident in the UK and

More on International aspects of NIC: