PDA

View Full Version : Paying of National Insurance whilst overseas


stuckinLatinAmerica
3rd May 2006, 21:56
As I am currently posted to an Embassy slot in slightly sunnier climes, and therefore working as a 'purple' rather than 'true blue' member of HM Forces, I came across the following in a recent copy of the army's Soldier magazine....

Working within the Defence Section at a British High Commission has certain benefits because I sometimes come across snippets of information that can be transposed across to the MOD.

A colleague in the Foreign and Commonwealth Office mentioned to me recently that if someone is living or working outside the UK for more than 52 weeks they can change their National Insurance contributions to Class 2 rates instead of Class 1, so paying only £2.05 a week regardless of their income.

I realise the army line is that tax and National Insurance are matters for the individual, but believe a response highlighting the pros and cons (if there are any) of officers and soldiers serving overseas taking advantage of this concession would be very helpful.

Name & Address supplied

The reply from a Brigadier in their equivalent of RAF PMA said:

Thank you for raising this issue. There is no concession for Service personnel abroad. Members of HM Forces are liable for Class 1 National Insurance Contributions (NICs) and this includes those serving abroad.

We also have reciprocal arrangements with the countries in which we work, which means that we don't pay the social security contributions that apply in those countries.

Paying NICs at the normal UK rate means that our NIC payments are not disrupted while we are serving abroad. This ensures that our rights to UK social service benefits, which are based on these contributions, are not adversely affected.

Different rules apply to civilian employees sent abroad.

While some may choose to pay a lower rate of NIC while based abroad, they may then find they are not eligible for the same level of benefits in the UK.

Am I missing something here, or are MOD personnel getting the smelly end of the stick yet again? I have conferred with my FCO contemporaries out here, and they've confirmed to me the points raised in the initial letter. Apparently, it is common knowledge within their organisation, and their HR staff take care of it all for them! Moreover, I am even informed (again by my FCO colleagues who are more in the know on this than I am) that paying Class 2 NICs has not affected their UK benefits in the slightest. Some FCO staff have done this for a number of years, and have now retired from their Service to return to the UK on full benefits.

Looks to me like one government department is earning it's IiP accreditation, whilst another doesn't appear interested. I'll leave you to judge for yourselves.

Bottom lip quivering here.
Stuckin

foormort
4th May 2006, 03:31
As well as the NI issue I am constantly bemused by CILCT (Charge in Lieu of Council Tax) pre JPA terminology by the way. Serving overseas for 3 years and I'm still paying council tax as well as paying for all the equivalent services in the states. Where does this money go. Council Tax is, as I understand it, for the benefit of the local authority where you reside. Well, who gets all the cash from the serving military members living overseas. Into the central government pot I'm sure, what a con!!:eek:

matkat
4th May 2006, 05:47
The ruling about the 52 weeks is indeed correct and is in fact a selling point for BAE systems when recruiting for Saudi I would dread to think that there is one rule for Military Personnel and a nother for Civilians(but would not of course be surprised) which surely highlights a discrimination issue.The situation regarding council tax must surely be the same I am assuming that You have a house in a certain area and in which You certainly have to pay the said tax however it would most certainly be reduced if You are living abroad but using Your house as a main residence whilst in the UK and indeed is Your intended Family home when You return.To be honest i would contact the relevent People within the DSS and indeed the local council office where Your home is located.

dallas
4th May 2006, 07:17
The situation is rather obvious. A reasonably large bunch of people who are legally unable to represent themselves as a group can have the rules applied as the taxman sees fit so they cannot enjoy the normal tax benefits of being overseas for sustained periods. In Germany, for example, I believe the NAAFI staff do not pay UK income tax.

On the other hand rules that they might benefit from, such as television licence requirements for buildings, can be worked the other way so they do not benefit. HM prisoners don't need individual tv licences because they do not have occupant-controlled locks on doors. I'm sure a decent lawyer could argue uninvited military room inspections makes individual's rooms public property?

The bottom line is if you're a government needing to raise taxes to pay MP's mortages, why not sting the forces with every tax available no matter where they are - what are they going to do, complain?

Cambridge Crash
4th May 2006, 08:06
SILA

What about your COLA - which most military colleagues serving overseas do not receive. See your PMs.

Shadwell the old
4th May 2006, 09:24
Having recently left the joys of the mighty hunters galley for civvy street, I decided to become a shiney, so I was interested to read your NI question. With the bit firmly between my teeth I consulted my tax books.

From the oracle (my tax book which is 800+ pages of pure fun), I see that Class 2 NIs are only to be paid by people who are self employed, there is no mention of embassy staff or any other special cases - other than fishermen and volunteer development workers. According to my book, anyone who is employed by HMG in UK (which includes Service people and civil servants), but are deployed temporarily outwith the UK boundaries, should pay full taxes and NI as if they are working in the UK. They are subject to UK laws and liable to pay UK taxes. Incidentally, paying Class 2 NI does preserve your entitlement to UK pensions and other benefits. However, if a self employed person earns more than £5035 (in the tax year 2006/7) they also have to pay Class 4 NI which is 8% of anything over £5035 (ie this is in addition to Class 2 rates).

I can only think that the Diplomatic Service although employed by HMG could be considered to be employed by an organisation outside the UK. This would mean that they would come under the same rules as for instance BAE Systems people working in Saudi, who do not pay tax on money earned in Saudi, (provided they restrict their visits to UK), because it is a different arm of BAE and is registered offshore. However, they can still pay Class 2 NI to secure their UK benefit entitlements. They would not pay the class 4 because their UK earnings would never reach the £5035 threshold.

The question I would ask is if the staff you refer to are locally employed by the embassy (eg secretaries and others who may be dependants of other embassy staff). There is no doubt a special regulation for the Ambassador and his immediate subordinates, but I would expect them to pay UK taxes.

Council tax should definitely only be paid by people occupying houses within the UK. The council tax is paid to the relevant local authority, so it should not be paid to central government. Who would be the local authority? No doubt the house you occupy overseas is a hiring, probably owned by a local person. A lawyer would have a field day!

I normally charge for any work I do, so I will submit my claim through JPA!! Hmmmm maybe I will not bother.

A bit long winded, but I hope you find this helpful.

Shadwell

Scud-U-Like
4th May 2006, 13:54
Not long-winded at all and a pleasant change from many of the misinformed ramblings on the subject.

dallas
4th May 2006, 15:08
Yeah, nice one Shadwell. Thanks for the info.

I knew a Thomson rep a while ago who voluntarily paid NI just in case she fell ill overseas - oddly enough like an insurance policy! - but not income tax because she was out of the country for 'the balance' of her year.

She said that she had to be careful not to stop in the UK over a set number of days a year - think it was about a month - otherwise she would pay income tax as a resident. While this means OOA dets - even army length - wouldn't count, embassies and RAFLOs perhaps shouldn't pay. But then is this when we can conveniently invoke the 'embassy is sovereign territory' thing?

Either way, I think a determined individual might eventually win a case, but might as well then quit with a troublemaker label firmly attached. Moreover, any benefits won would only be recovered by a reduction in LOA, LSA etc - it's the way of the world. Well, the British world.

endplay
4th May 2006, 15:15
CILOC is good for most of us most of the time. It particularly protects us against facing exhorbitant charges dependent on our posting location. If it was replaced with a local rate then many of us, especially the lower paid, could suffer. (I accept that there would be some winners) And it also pays the local tax overseas IIRC. It certainly did in Germany.

This is a bit like the clamour for PAYD. Now we're getting it and I don't see that many happy faces.

Finally, how many times have adminers been slagged off on this forum? Well we've got our wish; they're going (not all I know) and we have JPA. Hurrah!

FormerFlake
4th May 2006, 15:18
I have recently been advised by my Financial Advisor to pay UK NI, despite living and working abroad (paying local taxes etc). For me, it's a cheap pension plan.:)

Almost_done
4th May 2006, 15:21
Council tax should definitely only be paid by people occupying houses within the UK. The council tax is paid to the relevant local authority, so it should not be paid to central government. [Shadwell

Shadwell, an informed post but I should like to look at the point above, on a tour on an Island in the Eastern Med I was (along with everyone else) to a Council Tax Charge for occupying a MQ call it over the 3yrs almost £3000.

Now should I look at getting it refunded or a rebate? Also once back in Blighty as we pay our Council Tax Charge into the Central Gov how does the Local Authority we are in get is well deserving hands on this most needed money?

A2QFI
4th May 2006, 15:22
When I worked abroad I didn't pay Class 1, as I didn't have a UK based employer to pay their element of the charge. However, I voluntarily paid Class 4 contributions which maintained my right to a UK state retirement pension and (I think) the death grant. What do people who work long term for BAe in the great sandpit do re these contributions?

dallas
4th May 2006, 15:25
I should like to look at the point above, on a tour on an Island in the Eastern Med I was (along with everyone else) to a Council Tax Charge for occupying a MQ call it over the 3yrs almost £3000.


Switch to fat bloke in bank TV advert, dealing with existing customer:

"non-Sovereign Base area only..." [feigned look of sympathy]

Almost_done
4th May 2006, 15:31
Dallas

Laugh, I nearly feel off my seat, had the same arguement over the wifes pay or lack of on said Island, HMG coughed up the £18k, after industrial tribunal.

May seek further advice here.

LFFC
4th May 2006, 16:19
I have recently been advised by my Financial Advisor to pay UK NI, despite living and working abroad (paying local taxes etc). For me, it's a cheap pension plan.:)

Beware of Scottish Chancellors. By all accounts this one has plans to means test the state pension! Therefore, whilst your FA is presently quite correct, if you're lucky enough to retire on a decent military pension in the future, you may find that you don't get a state pension as well! :eek:

FormerFlake
4th May 2006, 16:38
Beware of Scottish Chancellors. By all accounts this one has plans to means test the state pension! Therefore, whilst your FA is presently quite correct, if you're lucky enough to retire on a decent military pension in the future, you may find that you don't get a state pension as well! :eek:

I wont be getting a decent military pension:oh:

LFFC
4th May 2006, 23:08
FF

Sorry to hear that. However, those that are lucky enough to get a good military pension when they retire at age 55 (PAS might qualify here) might consider investing in a decent private health insurance instead of continuing to pour money into NI contributions.

parabellum
5th May 2006, 01:04
When I was still in the mob NI and Tax were taken care of by the paymaster but once I started to work overseas, as a civvy, I opted to pay Class 3 contributions which don't provide much by way of benefit other than to maintain your right to a retirement pension. Class 3 are cheaper than class 2.
Some information herehttp://www.gov.im/dhss/security/payments/contributions.xml