Social Security Coordination Convention update
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The new Social Security Coordination Convention between the UK and Iceland, Liechtenstein, and Norway has been implemented.
We have outlined the social security treatment for expat employees below.
Employees coming to work in the UK — from Gibraltar, Iceland, Liechtenstein, Norway, or Switzerland
Home country social security contributions will continue to apply if the employee has been issued with a social security certificate of coverage (also referred to as a PDA1) by the relevant social security institution. The certificate can be used as evidence that they do not need to pay National Insurance in the UK.
The employee or employer can apply for a certificate if the individual is employed in Gibraltar, Iceland, Liechtenstein, Norway, or Switzerland, by a local employer and coming to work temporarily in the UK for up to 2 years by reason of employment.
If the individual works in both the UK and their home country and performs at least a quarter of their duties in their home country, a certificate can also be applied for.
Employees going to work in Gibraltar, Iceland, Liechtenstein, Norway, or Switzerland from the UK
National Insurance in the UK will continue to apply if HMRC has issued the employee with a certificate of coverage. The certificate can be used as evidence that the employee does not need to pay social security contributions in the other country.
The employee or employer should apply for a certificate if the individual is employed in the UK and is going to work temporarily in either Gibraltar, Iceland, Liechtenstein, Norway, or Switzerland for up to 2 years by reason of employment.
Similar to the UK inbound employees, if the individual works in both the UK and any of the countries mentioned above, performing at least a quarter of their duties in the UK, a certificate can also be applied for.
Special circumstances
If the worker does not satisfy the conditions but wants to remain in their home country social security system, HMRC and the social security authority in the relevant country may agree to this, but only in exceptional circumstances. In this case a certificate of coverage must be applied for from HMRC or the relevant social security authority as applicable.
For further information about the topic raised in this article, please contact our Human Capital Tax Manager Brenda Hu.