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Non Resident Executive - NIC status

Non Resident Executive - NIC status

Company I advise for on other matters has queried the following with me (down the pub), so I'm not acting in a professional capacity.

US Company with branches all over the world (London, Geneva, Vienna, Cape Town, Singapore, etc.) has appointed a Manx resident as their Chief Customer Officer. His contract is with the US office although he will not work there and none of his income will arise from activities in the US.

Due to the need to pay him in Sterling, he will be paid by the office in London. Although he will be based in Europe, he has no fixed office location - In effect his home in the Isle of Man is his office. He will travel all over the world (but mostly in mainland Europe and South Africa) liaising with customers and then provide feedback to the US based CEO about how to improve customer relations.

Despite the company having an office in London they have no customers in the UK. The reason for this being pure-CEO vanity.

HMRC have accepted that the executive is non-resident and employed on a foreign contract. As such he has been allocated an "NT" tax code and pays tax in the Isle of Man as a permanent Manx resident, where he was born and lives with his extended family.

The question mark comes over NIC's. Due to him being previously resident in the UK working for one of the banks, he has a UK tax code and payroll have determined that he should pay his NIC's in the UK and these should be accepted as UK contributions under the reciprocal arrangement with the Isle of Man, however the executive is adamant that he should not pay NIC's in the UK as he is non-resident and should pay them directly to the Manx treasury.

Payroll have raised the question with HMRC at Longbenton, but received no reply. I've looked for the relevant guidance, but I must admit that this situation doesn't fit into the usual boxes for non-residence.

The executive is keen to pay his NIC's to the Isle of Man government as this entitles him to maintain an enhanced pension due to local Manx contributions. Given that the company has no establishment and carries out no business on the Isle of Man it seems clear that in this scenario they believe they would save on Employer's NI.

Any guidance would be appreciated.


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18th Oct 2010 02:01

Executive is Right

 s1(6) SSCBA 1992:

(6) No person shall—

(a) be liable to pay Class 1, Class 1A or Class 2 contributions unless he fulfils prescribed conditions as to residence or presence in Great Britain;

reg145 SS(C)R 2001

(1) ... the conditions as to residence or presence in Great Britain or Northern Ireland (as the case requires) shall be:

(a) as respects liability of an employed earner to pay primary Class 1 contributions in respect of earnings for an employed earner’s employment, that the employed earner is resident or present in Great Britain or Northern Ireland (or but for any temporary absence would be present in Great Britain or Northern Ireland) at the time of that employment or is then ordinarily resident in Great Britain or Northern Ireland (as the case may be);

He has to be resident in the UK. HMRC have already accepted that he is not.

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