With effect from 1 May 2010 new EU rules (Regulation (EC) No 883) have been introduced which determine where an EU worker who works in more than one member state pays National Insurance contributions.
Although HMRC have suggested that the most likely scenario will be UK National Insurance will continue to apply to most workers in the UK there may be occasions when both employers and employees National Insurance contributions will need to be paid to the relevant collecting authority in another member state. This will generally however only be where the worker normally lives outside the UK and carries out a substantial part of their work in the member state in which they reside.
We have been advised by HMRC that the onus for demonstrating that another member state's national insurance contributions system applies to any work that that worker undertakes in the UK remains with the worker. As a result UK employers should continue to operate UK National Insurance contributions unless a worker produces a valid certificate, an A1 portable document. A valid certificate will confirm that for the period of their work in the UK the employer should treat the work as if it had arisen in the other member state and pay over both employers and employees national insurance to the relevant authority in that member state.
Unfortunately there is currently very little information on how an employer should pay over national insurance deductions for a worker in possession of an A1 portable document. We have therefore pointed out to HMRC the need for further details of the relevant authorities in other member states to be made readily available to UK employers and to have further guidance on the steps that a UK employer should take when presented with an A1 Portable Document by a worker. We are currently awaiting a full response from HMRC.
In the meantime if you have an employee who produces an exemption certificate, an A1 portable document, which suggests that National Insurance contributions are payable in another member state on UK earnings we would suggest that you immediately contact your professional adviser and seek advice from your PAYE tax office regarding how to pay over the correct amounts to the relevant authority in the other member state.
No comments have been made.