National Insurance Relief in UK Freeport or Investment Zone Special Tax Sites
06/07/2024 - 6 minutes readNational Insurance relief in UK Freeport or Investment Zone special tax sites is available to businesses that operate a business premises in a special tax site.
A special tax site is an area of land where businesses can claim certain tax reliefs. Special tax sites are sometimes known as Freeport tax sites or Investment Zone tax sites. A Freeport tax site is independent and separately authorised from Freeport customs sites, but they can cover the same area of land.
To claim the National Insurance relief, all employees must:
- – spend at least 60% of their working time in the special tax site
- – have started their employment between 6 April 2022 and before 30 September 2031 for English Freeport special tax sites and 30 September 2034 for Scottish Green Freeport, Welsh Freeport and Investment Zone special tax sites
- – be within the first 36 months of their employment
- – not have been employed by you or a connected employer in the previous 24 months
If an employee’s working arrangements change substantially
You should re-assess whether the qualifying conditions are still met.
You must stop claiming National Insurance relief when you no longer expect an employee will spend at least 60% of their working time in a single special tax site. From the start of employment, this applies unless you make adjustments to accommodate:
- – disability
- – pregnancy
- – maternity
Public authorities are not able to claim the Freeport or Investment Zone employer National Insurance relief.
National Insurance relief in UK Freeport or Investment Zone special tax sites
How much National Insurance relief you can claim
You will only need to pay Secondary Class 1 National Insurance contributions if your employee earns more than the Freeport and Investment Zone Upper Secondary Threshold of:
- – £25,000 per year
- – £2,083 per month
- – £481 per week
This means that if an employee earns less than this, then no Secondary Class 1 National Insurance contributions are due.
How long you can claim the National Insurance relief for
You can claim this National Insurance relief for all new employees for 36 months from the start of their employment for the period that they meet the qualifying conditions.
How to claim National Insurance relief
To claim the National Insurance relief, you must apply the relevant National Insurance contributions category letter when running payroll. Find out how to run payroll.
National Insurance contributions category letters to support employers claiming Freeport employer National Insurance contributions relief are:
| Category letter | Employee group |
|---|---|
| F | Standard category letter equivalent |
| I | Married women and widows entitled to pay reduced National Insurance contributions |
| S | Employees over state pension age |
| L | Employees who can defer National Insurance contributions |
You must keep evidence of the qualifying conditions being met.
National Insurance contributions category letters to support employers claiming Investment Zone employer National Insurance contributions relief are:
| Category letter | Employee group |
|---|---|
| N | Standard category letter equivalent |
| E | Married women and widows entitled to pay reduced National Insurance contributions |
| K | Employees over state pension age |
| D | Employees who can defer National Insurance contributions |
You must keep evidence of the qualifying conditions being met.
An example of an employee earning above the Freeport and Investment Zone Upper Secondary Threshold
The employer hires an employee on 23 May 2024 who is paid £3,000 per month gross by the employer (£36,000 a year).
At the start of the employment the employer reasonably expects that the employee will spend all of their working time at the employer’s business premises so the employee meets the 60% rule.
In practice the employee never works different working time and location arrangements.
The employee was not employed by the employer or a connected employer in the previous 24 months.
The employee and the employer both meet the rules, and the employer claims the relief.
As the employee’s earnings are more than the Freeport and Investment Zone Upper Secondary Threshold of £2,083 per month, the employer will pay secondary National Insurance contributions on the amounts above the Freeport and Investment Zone Upper Secondary Threshold.
An example of an employee not spending 60% of their working time in the special tax site
The employer hires an employee on 1 October 2022 who is paid £3,000 per month gross by the employer (£36,000 a year).
At the start of the employment the employer reasonably expects that the employee will spend 2 days (40% of their working time) at the employer’s business premises in a special tax site and 3 days (60% of their working time) working from home so the employee does not meet the 60% rule.
The employee was not employed by the employer or a connected employer in the previous 24 months.
The employee does not meet the rules for claiming the relief so the employer cannot claim the relief.
The employer will pay secondary National Insurance contributions as normal without claiming the relief on all earnings above the Secondary Threshold (£758 per month in the 2024 to 2025 tax year).
How can MCL Accountants help?
Contact MCL Accountants on 01702 593 029 if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.
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Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.
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