NIM01577 - Class 1 Structural Overview: zero-rate of secondary NICs for Freeport and Investment Zone employees: examples: Example 7 – Substantial change in employee’s working arrangements

Example 7 – Substantial change in the employee’s working arrangements which ends the qualifying period, and a further substantial change which starts a new qualifying period

An employer who qualifies for the zero-rate of secondary NICs for Freeport employees in respect of an employee. The employee started work for the employer in April 2023 and the employer reasonably expects the employee to spend 60% of their working time working at the employer’s business premises in the Freeport special tax site.

In May 2024, the employee is successful in applying for a promotion outside of the Freeport special tax site. The employer can no longer claim the zero-rate of secondary NICs for Freeport employees in respect of the employee’s earnings because there has been a substantial change in their working arrangements which has resulted in them no longer spending 60% of their working time in the Freeport special tax site.  When the employee is promoted this is not a break in the existing employment and the existing employment continues.

In December 2024, the employee moves back to work at the original Freeport special tax site. This is a further substantial change in the employee’s working arrangements. In this example because the employee has continued to work for the same employer and there has not been a break in the employment, the employer can consider claiming the zero-rate secondary NICs for Freeport employees for this employment. The employer can only claim if they reasonably expect that the employee will spend 60% of their working time working at the employer’s business premises at the Freeport special tax site.

A qualifying period starts (there has been a substantial change in the employee’s working arrangements) and if all of the conditions for claiming the relief are met then the employer can do so. The employer can claim the relief for the remainder of the 3 year period, which began when the employee started working for the employer in April 2023.  The employer will stop claiming the relief in April 2026.

In the above example, if there had been a break in the employment, the employer would no longer be able to claim the relief in December 2024 because it would be considered a ‘new employment’ and would not qualify because of the 2 year rule in section 2(2) of NICA 2022, that is, the employee cannot be have been employed by the employer or a connected employer in the previous 24 months.

Note

This example also applies to employees working in an Investment Zone special tax site.