NIM01520 - Class 1 Structural Overview: zero-rate of secondary NICs for Freeport and Investment Zone special tax site employees: 60% rule

Section 2 of the National Insurance Contributions Act (NICA) 2022

The 60% rule is that at the time the qualifying period begins, the employer reasonably expects that 60% or more of the earner’s employed time (“working time”) during that period will be spent in a single Freeport or Investment Zone special tax site in which the employer has business premises.

‘Working time’ is the time that the employee is expected to provide services for the employer under the terms of an employment contract. Where the employee is on a period of leave from working time spent at a Freeport or Investment Zone special tax site then, for the purposes of the 60% rule, the proportion of time spent on leave is the same as the proportion of the earner’s working time that would be spent at that site if they weren’t on leave. Leave includes, but is not limited to, maternity, paternity, adoption, sickness and annual leave.This condition is treated as having been met where the employer has made an adjustment to their employee’s working pattern to accommodate the following protected characteristics: disability, pregnancy and maternity – see NIM01525.

See NIM01570 for examples.

An expectation that ceases to be reasonable (section 2(4)(d))

Where the employer no longer reasonably expects the employee to spend 60% of their working time in the Freeport or Investment Zone special tax site then the employment no longer qualifies for the zero-rate.

This is most often the case when there is an erosion of the time spent in the Freeport or Investment Zone special tax site over a period of time. See NIM01570 for an example.

Single Freeport or Investment Zone special tax site

A Freeport or Investment Zone special tax site is a geographical area designated by the Treasury in which multiple Freeport and Investment Zone tax reliefs are available.

Where an employee is expected to work at more than one Freeport or Investment Zone special tax site the employer can only claim the relief if the employee is reasonably expected to spend 60% of their working time at one of those sites. If an employee does not spend 60% of their working time at a single Freeport or Investment Zone special site then the employer cannot claim the relief.