Am dealing with an individual who has up to now lived and worked entirely in the UK, but is about to do a stint of about 3 years in Kenya working for a Kenya employer. He wishes to protect his NI contribution record, if necessary by way of class 3 contributions.
We subscribe to CCH online tax manuals, which at paragraph 1020-350 provides the following guidance:
"the legislation provides that such an employee may nevertheless pay voluntarily if he has the following history of residence or contribution in the UK:
•residence for a continuous period of at least three years at any time before the period for which the contributions are paid; or
•three qualifying years of contribution at any time before that period.
This effectively ties eligibility to ordinary residence in the UK."
Say what? Suppose we are considering making 2020-21 a qualifying paid up year:
Take the period (say) 06/04/1995 to 05/04/1998 throughout which he was both resident in the UK and had a full contribution history.
Is this a continuous period of at least three years? Answer yes.
Was that period "at any time before the period 2020-21"? Answer yes
By that logic he would be entitled to contribution in 2020-21 by reference to either of the two bullet points.
But that is surely nonsense. My recollection of the old "ordinary residence" rules required that the period examined is at least somewhere in the proximity of the reference period.
So, what am I missing?
With kind regards
Clint Westwood
Replies (6)
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If he leaves after 31 May, he will probably have paid enough Class 1 before he goes to make 2017-18 a qualifying year. You only need earnings subject to NICs of £5,876 to make the year qualify. (If the employer had been in the UK, he would have had a 52-week continuing liability, so would have paid Class 1 for the whole of 17-18, and some of 18-19, possibly enough to qualify that full year without voluntary top-up).
For 2018-19 and 2019-20, he would have been entitled to pay Class 2 instead of Class 3 without having been self-employed (there are special 'Persons Abroad Regulations' that explicitly permit this), but Class 2 is to be abolished at 5 April 2018, so he will have no choice but to pay Class 3. Sorry, Euan!
Leaving the UK for only three years will not break his ordinary residence for NI purposes, but that's not really relevant. The fact that somebody has lived in the UK for at least three years at some point does indeed entitle them to pay Class 3 - it's in the NI regulations. It allows long-term expats who will eventually come home to maintain their state pension.
He should wait until he's back in the UK, check his personal tax account the following year, and see if he needs to top up his NI with Class 3 then. He has six years to do so, although rates might rise if he waits more than a year.
Page 9 of HMRC's NI38 leaflet says:
"You can pay Class 2 NICs if you are employed or self-employed abroad and if you satisfy the following conditions:
• you have lived in the UK for a continuous 3-year period at any time before the period for which NICs are to be paid - (if you have lived or worked in another EEA country or in Turkey, time spent there may help you to meet this condition)
• before going abroad you paid a set amount in NICs for 3 years or more (this will be checked when you ask to pay Class 2 NICs)
• immediately before going abroad you were ordinarily an employed or self-employed earner in the UK
So, I think the answer is No - he cannot pay Class 2 NIC for 2017/18 on going abroad to work.