NIM01578 | Class 1 Structural Overview: zero-rate of secondary NICs for Freeport and Investment Zone employees: examples: Example 8 – Substantial change in employee’s working arrangements which starts a qualifying period after the employment started

Example 8 – Substantial change in employee’s working arrangements which starts a qualifying period after the employment started – zero rate of Secondary NICs payable for less than 36 months

An employee starts an employment on 1 July 2024. The employer has business premises within the Investment Zone special tax site but for the first 3 months of employment they require employees to undertake training in a location outside of the Investment Zone special tax site.

For the period of training the employer cannot claim the zero-rate of secondary NICs for Investment Zone employees in respect of the employee’s earnings as, at the start of the qualifying period (the start of the employment), the employer did not reasonably expect that the employee would spend 60% of their working time in the Investment Zone special tax site.

On 1 October 2024 the employee has successfully completed their training and, as required under their contract of employment, starts work at the employer’s business premises in the Investment Zone special tax site. This is a substantial change in the employee’s working arrangements and starts a qualifying period for the zero-rate of secondary NICs for Investment Zone employees in respect of the employee’s earnings. The employer reasonably expects the employee to spend 60% of their working time working at the employer’s business premises in the Investment Zone special tax site, so provided all the qualifying conditions are met, they are now able to claim the relief for this employee from 1 October 2024.

The relief is only available to claim for each employee for a three-year period which starts on the day the employment begins, not on the date the employee moves into the Investment Zone special tax site. In this example the employment started on 1 July 2024, so the relief can only be claimed in relation to earnings paid to the employee for a maximum of 33 months from 1 October 2024 to end of June 2027, on the assumption that the conditions to claim the relief continue to be met until the end of June 2027.

Note

This example also applies to employees working in a Freeport special tax site.