Class 2 NIC and Irish CIS subcontractors in the Uk

Class 2 NIC and Irish CIS subcontractors in the Uk

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We act for a CIS subcontractor who is domiciled, resident and ordinarily resident in Eire, and whose only permanent establishment is in Eire.  He reports his world-wide CIS profits on his Eire tax return; he pays to the Eire authorities the equivalent social security charges and he has the appropriate certification to prove it (form A1, formerly form E101).

He is also UK resident by reference to domestic law.  However for Income Tax purposes he is "treaty resident" in Eire by reference to the Anglo-Irish Double Taxation agreement.  He never has any permanent or deemed permanent establishment of business in the UK and therefore no UK self-employment pages are attached to his UK self assessment tax return.

That DT agreement does not appear to cover NI contributions, but there are separate EU regulations governing migrant self-employed workers.  An obligation to pay class 2 NIC in the UK potentially arises under somewhat stricter tests than apply to the IT regime, but for exemptions granted to EU migrant workers in possession of A1 certification of paying the equivalent contributions in their primary EU state.

So our client appears to be safe from an obligation to pay Class 2 NIC were he to rely on his A1 exemption.  The trouble is, he would prefer to pay this NIC, if he can legitimately do so.  Many of his colleagues of the previous generation receive a state pension from both UK and Eire, and he would like to join that club when he retires assuming that the cost is £2.50 or so per week (for the UK element).

Presumably he could join the club by paying voluntary class 3 NIC, but that is a bit expensive.  He is only interested in class 2.

My understanding is that you can only pay class 2 under an obligation.  So my question to you all is: Can he opt to disregard (or surrender) his A1 exemption and thereby induce an obligation to pay class 2?

With kind regards

Clint Westwood

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By nogammonsinanundoubledgame
18th Jul 2011 07:18

No bites, I see, so how's this for a rider?

Further to the above, *IF* you happen to pay NIC in error, would that mean that any state benefits paid out on the back of those contributions would also be unlawfully received?  Sensibly, I would assume yes, particularly if they were paid culpably in error.  Not so sure about contributions paid innocently in error and accepted by NICO.

I regularly come across individuals who continue to pay class 2 NIC well beyond the date on which they ceased to be self employed, and NICO does not seem (yet) to have the joined-up computer to pick these up.  Decades down the road, I would not expect them to be able to trace the issue of entitlement back that far, and all that they will have is the contributions history, legit or not.  I suppose in most of the practical examples that I come across the continued payment of class 2 NIC has coincided with a simultaneous payment of class 1, so the claimant would probably have a valid claim to benefit on the strength of the class 1 contributions even if class 2 were paid in error at the same time.

The point is of some relevance to my client in the original post.  The question arises, whether the class 2 contributions are paid "in error" if he pays them by reason of disregarding his right to exeption on the A1/E101 certificate, and whether this distinction would deny him the right to benefits arising from those contributions.  Clearly if there is no prospect of obtaining benefits then there is no incentive to waive exemption from contribution.

The fact that so many of his compatriots claim both Irish and UK pensions on retirement could be a massive illegal act.  Or they may have just been canny.

Any views on this?

With kind regards

Clint Westwood

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