ICAEW’s Tax Faculty has responded to draft regulations that introduce a new reporting requirement for employers in freeport and investment zone special tax sites. Employers can claim NIC relief in respect of employees working in special tax sites where certain conditions are met. The regulations require employers making a claim to report a workplace postcode for those employees the claim relates to. 

ICAEW’s view of the proposals 

The faculty believes that claiming the NIC relief is already challenging, which may deter some employers from claiming the relief. The additional postcode reporting obligation will only add to this existing burden.  

Further, there is a fundamental problem with the relief in that, apart from remuneration details, payroll is not real time. Therefore, the reported location postcodes will always relate to a previous pay period. This is because special tax site eligibility for a pay period is not known for some employees until after the pay period has ended (eg, those who start or stop working in, or work partly inside and partly outside, a freeport or investment zone). It is only after the end of the pay period that the necessary compliance eligibility checks can be performed with certainty.  

Recommendations for HMRC 

HMRC should clarify how employers should align employees’ workplace location data to a current period’s NIC calculations. Payroll software will have an important role to play in this compliance reporting obligation. HMRC should liaise with software developers to ensure that payroll products include eligibility “checkers” and guidance to assist employers and their payroll agents.  

For further information, see HMRC’s guidance Check if you can claim National Insurance relief in UK Freeport or Investment Zone special tax sites.