Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


ANNEX 2

MARINERS—LIABILITY FOR CLASS 1 NATIONAL INSURANCE CONTRIBUTIONS

1. INTRODUCTION

  1.1 This annex:

    —  sets on the normal rules governing liability to pay Class 1 National Insurance contributions;

    —  explains who mariners are and why special rules are required to govern liability to pay contributions by mariners working outside Great Britain and their employers;

    —  sets out the special rules governing mariners' and their employers' liability to pay National Insurance contributions.

2. THE NORMAL RULES

  2.1 For liability for Class 1 National Insurance contributions to exist (on earnings above the lower earnings limit) there must be:

    —  an employed earner (employee);

    —  a secondary contributor (employer);

and both the employee and employer must satisfy prescribed conditions as to residence and presence in Great Britain.[86] (Section 1(6) of the Social Security Contributions and Benefits Act 1992 (SSCBA))

Employed Earner

  2.2 An "employed earner" is a person who is gainfully employed in Great Britain either under a contract or service, or in an office (including elective office) with emoluments chargeable to income tax under Schedule E. (Section 2(1)(a) SSCBA)

Secondary Contributor

  2.3 In the case of an employed earner employed under a contract of service, the secondary contributor is his employer. (Section 7(1)(a) SSCBA)

Residence and Presence in Great Britain

  2.4 The prescribed conditions for residence and presence in Great Britain are:

    —  an employed earner is liable to pay primary Class 1 contributions if:

  —  he is resident or present in Great Britain at the time of his employment; or

  —  he is ordinarily resident in Great Britain at the time of his employment.

    —  a secondary contributor is liable to pay secondary Class 1 contributions if:

  —  he is resident or present in Great Britain when the contributions become payable; or

  —  he has a place of business in Great Britain when the contributions become payable.

  (Regulation 119(1) of the Social Security (Contributions) Regulations 1979 ("the regulations")).

3. THE SPECIAL RULES FOR MARINERS

Who are Mariners?

  3.1 The regulations (regulation 86) define a mariner as:

    —  a persons who is, or has been, in employment under a contract of service either as:

  —  a master or crew member of a hovercraft;

  —  a master, crew member or radio officer of any ship;

  —  a supernumerary: that is a person employed an board a ship in any other capacity; e.g., cattleman, shop assistant, hairdresser—provided that the work is done for the ship, the crew or any passengers, cargo or mail carried by the ship; and

    —  the contract of employment is entered into in the UK and is intended to apply either wholly or partly during the voyage.

Why are there special rules for Mariners?

  3.2 The special rules governing the liability of mariners working outside Great Britain and their employers to pay Class 1 contributions are needed because they would otherwise fall outside the scope of the normal rules governing the liability for contributions of people working in Great Britain and their employers.

Special Rules—Employed Earner

  3.3 The regulations (regulation 88) treat a mariner working outside Great Britain as being in employed earner's employment if:

    (i)  he is employed on board a British shi

p[87]; or

    (ii)  he is employed on board a ship; and

      —  the contract in respect of the employment is entered into in the UK with a view to its performance (in whole or in part) while the ship or vessel is on her voyage, and

      —  the person by whom the mariner's earnings are paid has a place of business in Great Britain; or

      —  in the case of employment as a master or member of the crew, either the person by whom the mariner's wages are paid or the owner (or managing owner if there is more than one owner) of the ship or vessel has place of business in Great Britain; or

    (iii)  he is not covered by (ii) above but is employed as a master, member of the crew or radio officer on board any ship or vessel; and

      —  in the case of a radio operator, the contract under which the employment is performed is entered into in the UK and the employer or the person paying the radio operator has a place of business in Great Britain, or

      —  in the case of a master, member of the crew or radio officer, the contract is not entered into in the UK but the person paying the master, member of the crew or radio officer has his principal place of business in Great Britain.

Special Rules—Residence and Presence in Great Britain

  3.4 The regulations (regulation 87) provide that:

    —  the normal prescribed conditions for residence and presence in Great Britain (paragraph 2.4 above) do not apply to mariners and their employers;

    —  to be liable to pay primary Class 1 contributions (or Class 2 or 3 contributions) a mariner must be domiciled or resident in GB;

    —  to be liable to pay secondary Class 1 contributions in respect of a mariner, the secondary contributor must be resident or have a place of business in Great Britain.

Special Rules—Secondary Contributor

  3.5 In respect of a mariner's employment which the special rules set out in paragraph 3.3 above treat as employed earner's employment, the regulations (regulation 93) provide that:

    —  where the person employing the mariner is not resident or does not have a place of business in GB; but

    —  the person who pays the mariner his earnings for that employment is resident or has a place of business in GB; then

    —  the person who pays the mariner his earnings is treated as the secondary contributor liable to pay secondary Class 1 contributions.

Summary

  3.6 The operation of the special rules is summarised in the attached table.

Liability for class 1 NICS of mariners working outside Great Britain

UK Domicile/Residence Non-UK Domicile/Residence
British Ship Non-British ShipBritish Ship Non-British Ship
Place of
business
in UK1
LiabilityMaster or Crew Member Master or
Crew
 Member
Master or Crew
Member
Master or
Crew
Member

Contract made inside UKPrincipal EmployeeYesYes NoNo
Employer YesYesNo No
AnyEmployee YesYesNo No
Employer YesYesNo No
NoneEmployee YesNo2No No
Employer NoNoNo No
Contract made outside UKPrincipal EmployeeYesYes NoNo
Employer YesYesNo No
AnyEmployee YesNo2No No
Employer YesNoNo No
NoneEmployee YesNo2No No
Employer NoNoNO No

1 For liability for primary (employees') Class 1 contributions, the place of business test relates to person paying the mariner, or owner of the vessel. For liability for secondary (employers') Class 1 contributions, the place of business test relates to person paying the mariner or the employer.
2 Individuals can opts for pay class 2 or 3 contributinos. SMISendMail;

16 February 1999


86   Great Britain (England, Scotland and Wales, but not Northern Ireland, the Isle of Man and the Channel Islands) includes the territorial waters of the United Kingdom adjacent to Great Britain. The territorial waters of the United Kingdom are the seas within the "12 mile limit" measured from the low water mark at any point on the coastline to a point 12 miles out to sea. Back

87   A British Ship is any ship or vessel belonging to Her Majesty, or any ship, vessel or hovercraft registered in Great Britain (i.e., is British "flagged"). Back


 
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