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http www hmrc gov uk nic work new rules htm

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Foreign workers NI rule

NI for foreigners. After May 1 if you employ someone from another European country, they may be exempt from UK NI contributions. On the other hand, from then on you could find yourself responsible for calculating and deducting NI under the rules and regulations of a foreign country. How do you know which will apply to you?

New and current employees. Unless your foreign employee has handed you a Form E101, soon to be renamed Form A1, you should continue to work out their NI deductions using the normal UK rules. However, if your employee hands you a Form E101/A1, stop deducting UK NI from their pay immediately.

Trap. Forms E101/A1 were usually only valid for one year but from May 1 their validity has been extended to two years. This extension does not automatically apply to existing E101 holders. So if an employee has provided you with one which runs out after May 1 2010, you must start to deduct UK NI contributions the next time you pay them following its expiry date. It’s up to the employee to get a new Form A1, not you.

European responsibility. From May 1, in certain circumstances, the new rules will mean that a UK employer can be responsible for applying the NI rules of other European countries. It could also mean you need to complete documents for the overseas tax authorities. That sounds rather daunting but there’s no need to panic.

Rare event. Essentially, this would only apply where individuals from another European country work for and are paid by you, but remain employees of a foreign business. For example, when they are on secondment from a sister company. HMRC has indicated that it will offer advice and assistance in these circumstances.

For a link to HMRC’s webpage on the new NI rules, visit http://tax.indicator.co.uk (TX 10.12.01).