NIC settlements for outbound employees with UK employer

Produced by Tolley in association with Paul Tew

The following Employment Tax guidance note Produced by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:

  • NIC settlements for outbound employees with UK employer
  • Scope of agreement
  • Operating the agreement
  • NIC settlement return (NSR)

NIC settlements for outbound employees with UK employer

HMRC offers two arrangements that relax the strict PAYE procedures in respect of social security / NIC. One of these is the modified NIC arrangement covering outbound employees who are UK nationals, but who have been sent to work on an overseas assignment by a UK employer, known as ‘EP Appendix 7B ― Modified Class 1 NIC for employees assigned from the UK to work overseas’ (EP APP 7B). The EP APP 7B application form is available at PAYE82004.

Scope of agreement

A modified NIC settlement scheme is available for UK employers that have employees seconded abroad and where their employee satisfies all of the following conditions:

  1. •

    is assigned to work abroad for a period of limited duration, but for more than a complete tax year

  2. •

    is non-resident in the UK and not liable for UK tax on earnings from the relevant employment

  3. •

    has an ongoing liability to UK NIC whilst working abroad

  4. •

    pays Class 1 NIC on earnings in excess of the upper earnings limit for all earnings periods throughout the year, ignoring the month during which the employment starts or ends if that is a part month. In the case of employees with annual pay periods covered by the agreement, their earnings must exceed the annual upper earnings limit, pro-rated if the employment begins partway through the tax year

  5. •

    receives some earnings and / or benefits derived from the employment from sources other than the UK employer, eg from overseas employer

Operating the agreement

The arrangement applies on the basis of a ‘best estimate’ of those elements of earnings in an employee’s remuneration package that are subject to Class 1 NIC calculated at the start of each tax year, or at the time the individual leaves the UK to start an assignment overseas. The ‘be

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