IMEs based in jurisdictions that do not have a social security agreement with the UK are particularly likely to be affected.
HMRC now explicitly states that NICs liability should be apportioned based on the period earnings were earned, not on the employee’s location at the time of payment. This applies to salary, bonuses, share awards, and payments that are paid on a lag after they are "earned". This is a change from HMRC’s previous position which focused on location at the time of payment.
• Historic Corrections Required
HMRC states that employers must review payroll records for the past six years and correct any under - or overpayments via Real Time Information (RTI). Refunds can be claimed where NICs was overpaid.
• identify IMEs that may be affected and review historic earnings;
• consider adjusting payroll systems to handle NIC apportionment across multiple jurisdictions; and
• maintain clear audit trails for historic and future payments.
Key Changes
• Apportionment Approach ConfirmedHMRC now explicitly states that NICs liability should be apportioned based on the period earnings were earned, not on the employee’s location at the time of payment. This applies to salary, bonuses, share awards, and payments that are paid on a lag after they are "earned". This is a change from HMRC’s previous position which focused on location at the time of payment.
• Historic Corrections Required
HMRC states that employers must review payroll records for the past six years and correct any under - or overpayments via Real Time Information (RTI). Refunds can be claimed where NICs was overpaid.
Why It Matters
This clarification significantly impacts payroll compliance and audit risk. Employers with an internationally mobile workforce must:• identify IMEs that may be affected and review historic earnings;
• consider adjusting payroll systems to handle NIC apportionment across multiple jurisdictions; and
• maintain clear audit trails for historic and future payments.
Next Steps
Please contact our expert Tax team if you need any assistance with understanding the new guidance or if you have any questions regarding the tax and social security implications of IMEs for your business or clients.
Thank you to Douglas Pyrke and Alex Tolcher for the contribution of this article.
