In a recent update to its National Insurance Contributions manual (NIM), HMRC have formally revised the administrative concession for non-UK resident directors of UK companies (specifically within NIM12013), which materially changes the eligibility criteria. This brings the guidance in line with the one in the CA44 Booklet (CA44: National Insurance for company directors), which was updated to reflect the same guidance starting with the tax year 2020/21).
The concession allows non-resident directors to visit the UK and not trigger a liability to Class 1 NICs on earnings from a UK company where they satisfy some specific conditions. The updated guidance in the NIM states that the concession can only be applied where the director comes from a country which does not have a social security agreement with the UK.
For some time, HMRC have provided an administrative concession that allows non-UK resident directors to avoid Class 1 NICs liability on income earned from a UK company, provided they meet specific criteria:
Under the previous guidance in the National Insurance Manual, the concession was available to nonresident directors from any location provided the director met the eligibility conditions and this domestic concession would not interfere with the terms of the international agreements the UK might have been a part of.
The updated guidance has introduced a key wording change, such that it now confirms that the administrative concession can only apply to non-resident directors coming from a country without a social security agreement with the UK.
Therefore, individuals coming from agreement and EU/EEA countries and Switzerland are specifically excluded and the concession cannot apply to them (in line with the guidance in the CA44 Booklet). Such individuals may still utilise the terms of a Social Security Agreement to be exempt from UK NIC should it be the case. The updated guidance corrects a lack of alignment between the guidance provided by HMRC in the NIM and that in the CA44 Booklet.
To navigate these changes effectively, it is essential that both non-resident directors and UK companies fully understand the updated requirements. Companies should also stay up to date with these changes to avoid potential liabilities or penalties. The scope of the concession has been significantly limited (aligning it to the existing CA44 guidance) and therefore it is essential to ensure that the social security treatment applied for non-resident directors remains correct and eligibility criteria continue to be met.
Individuals coming from the EU/EEA, Switzerland or reciprocal agreement countries should not rely on the concession and the provisions in the relevant social security agreement should be reviewed to identify if any favourable clauses could be used to claim exemptions from UK National Insurance contributions.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
David Crew
Manager
Andrei loanei
Senior Manager
Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
©2024 Vialto Partners. All Rights Reserved.