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Ukraine crisis: tax and NIC treatment of employees relocating


Published: 10 May 2022 Update History

How do the rules operate for displaced employees and those relocating to the UK? ICAEW’s Tax Faculty provides a summary.

HMRC has modified the national insurance contributions (NIC) rules for employees working in Russia, Belarus, or Ukraine who, owing to the invasion, temporarily return to the UK to work for their employer. However, it has not announced any other easements for those forced to relocate. 

Tax residence

As HMRC has not announced any tax-related easements, existing tax rules must be applied to an individual’s circumstances.

In the UK, an individual’s tax residence is determined by the statutory residence test (SRT). The SRT contains a number of tests. Several of these consider the number of days spent in the UK. However, up to a 60-day limit in each tax year, days do not have to be counted where:

  • the individual would not be present in the UK at the end of that day, but for exceptional circumstances beyond the individual’s control that prevent them from leaving the UK; and
  • they intend to leave the UK as soon as those circumstances permit.

The legislation cites examples of circumstances that may be ‘exceptional’, including national or local emergencies such as war, civil unrest, or natural disasters

The Foreign, Commonwealth & Development Office (FDCO) has advised against all travel to Russia, Belarus, and Ukraine. HMRC’s Residence, Domicile and Remittance Basis Manual at RDRM13250 says that individuals who return and stay in the UK while FDCO advice remains at this warning level would normally have days spent in the UK ignored under the SRT, subject to the 60-day limit.

Whether the earnings of employees working in the UK are liable to UK tax will depend on their residency status under the SRT. If an individual is deemed UK resident under the SRT and undertakes a day’s work in the UK, this will be deemed a UK workday and liable to UK tax.

The timing and nature of payments to employees, such as for accommodation, relocation fees or cash support, will also require scrutiny to determine the correct tax treatment depending on the circumstances of each individual employee.


Employees coming to work in the UK from Russia, Belarus, or Ukraine

The general rule is that class 1 NIC must be paid for an employee who has come to work in the UK from the date the person starts work in the UK.

There is an exception to this general rule for employees coming to work in the UK from a ‘rest of the world country’ – such as Russia, Belarus, or Ukraine – in certain circumstances. The employee and employer are exempt from paying UK class 1 NIC for the first 52 weeks of their employment in the UK if they meet the following conditions:

  • the employee is not ordinarily resident in the UK;
  • the employee normally works outside the UK for a foreign employer;
  • the employee is sent to work in the UK for a time by that foreign employer; and
  • when in the UK, the employee continues to work for that employer.

Once the 52-week period has ended, the normal rules apply.

Employees working in Russia, Belarus, or Ukraine temporarily returning to work in the UK

The starting point for such employees is that employer and employee would have been obliged to pay NIC for the first 52 weeks that the employee was abroad if:

  • the employer has a place of business in UK;
  • the employee is ordinarily resident in UK; and
  • immediately before the start of the employment the employee was resident in the UK.

Where an employee returns to the UK on temporary duty, the situation will depend on the nature of the duties.

If the duties are incidental to overseas employment, such as a briefing or further training for that employment, the employer should treat the employee as still abroad. The employer should continue to deduct class 1 NIC until the 52-week period of class 1 liability is met.

If the 52-week period of liability has ended, an employer can:

  • disregard up to the first six weeks of employment in the UK (this is not a legal requirement, but a concession to ease administration when an employee briefly returns to the UK, which only applies where they return to the UK for the same employer);
  • pay contributions in the normal way for any further period in the UK.

Where the 52-week period has not ended, it is not extended by any period of employment in the UK which falls within it.

If the employee goes to work abroad again and any existing liability period has ended, class 1 NIC will continue to be paid for 52 weeks, starting from the contribution week in which the overseas employment begins.

A further period of liability will arise only if the conditions in the three bullet points at the start of this section are met.

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