The ICAEW Tax Faculty has provided guidance to clarify how employers should apply the freeports upper secondary threshold for NICs.
The National Insurance Contributions Act 2022 sets out that, from 6 April 2022, Class 1 secondary NICs are charged at 0% on earnings for qualifying employees working in a freeport tax site up to the freeports upper secondary threshold (FUST) of £25,000.
The Tax Faculty notes that HMRC’s guidance on how to calculate class 1 NICs appears inconsistent. HMRC’s EB5 guidance for payroll software developers suggesting that the FUST needs to be used when calculating NICs for all employees (i.e. not only for qualifying freeport employees) and also for calculating primary NICs.
Booklet CWG2 confirms the correct treatment, i.e. that the FUST only applies for calculating secondary Class 1 NICs for qualifying freeport employees.
Where different figures result from the incorrect application of a breakpoint for the FUST, the Tax Faculty reports the following: ‘HMRC will accept either calculation for primary or secondary contributions, (i.e. with or without a breakpoint at the FUST, undertaken using the exact percentage basis method or using the table method), for non-freeport employees. For qualifying freeport employees, a breakpoint at the FUST will always be needed in the secondary class 1 NIC calculation.’
The ICAEW Tax Faculty has provided guidance to clarify how employers should apply the freeports upper secondary threshold for NICs.
The National Insurance Contributions Act 2022 sets out that, from 6 April 2022, Class 1 secondary NICs are charged at 0% on earnings for qualifying employees working in a freeport tax site up to the freeports upper secondary threshold (FUST) of £25,000.
The Tax Faculty notes that HMRC’s guidance on how to calculate class 1 NICs appears inconsistent. HMRC’s EB5 guidance for payroll software developers suggesting that the FUST needs to be used when calculating NICs for all employees (i.e. not only for qualifying freeport employees) and also for calculating primary NICs.
Booklet CWG2 confirms the correct treatment, i.e. that the FUST only applies for calculating secondary Class 1 NICs for qualifying freeport employees.
Where different figures result from the incorrect application of a breakpoint for the FUST, the Tax Faculty reports the following: ‘HMRC will accept either calculation for primary or secondary contributions, (i.e. with or without a breakpoint at the FUST, undertaken using the exact percentage basis method or using the table method), for non-freeport employees. For qualifying freeport employees, a breakpoint at the FUST will always be needed in the secondary class 1 NIC calculation.’
