This bulletin follows the release of the September Agent Update (Issue 135). In this issue we cover the content most relevant to employment taxes and reward activities.

Apportionment of class 1 National Insurance contributions (NICs) for internationally mobile employees

New guidance published by HMRC

• HMRC have published new guidance outlining when they consider class 1 NICs are due on earnings paid to internationally mobile employees.
• The updated guidance states HMRC’s view that if an employee was liable for class 1 NICs at the time the employment was carried out, that individual (and their employer) would be liable for NICs in respect of those “UK sourced” earnings, even if they are paid later (for example, after the individual has left the UK and is no longer within the scope of NIC).
• This would mean that where an individual earned a bonus payment while working in the UK and being subject to UK NICs, the individual (and their employer) would still be liable for NICs if the bonus is paid after the individual has moved abroad on the basis that the bonus was earned in the period during which they were subject to UK NICs.
• Conversely, for individuals coming to the UK, their earnings may be apportioned where they become subject to UK NICs upon arrival to the UK. The apportionment for payments made after relocation to the UK will be based on the number of days they worked in the UK over the period the earnings were earned (meaning if the bonus was wholly earned before arrival, no UK NICs will be payable). 
• Please see the updated guidance for further details.
• The HMRC guidance suggests that employers “should be advised” to make payroll corrections for six prior tax years through amending payroll submissions. Such corrections may result in a liability or a NICs refund. Details of how to do this are included in the agent update, and we have summarised these below. 

Amending class 1 NICs on earnings in prior periods

• Employers must make sure that relevant evidence is held to support any amendment, including:
  • a record of the employees’ NI numbers;
  • a total amount and description of the relevant earnings and the amount of NIC already paid on it;
  • when the relevant earnings were paid and the period over which they were earned;
  • the amount of the relevant earnings now considered to be liable to NICs;
  • the amount of the employee and employer Class 1 NICs now considered to be correct;
  • the amount of NICs now due to be paid or refunded; and
  • an explanation of what caused NICs to be over or under paid. 

See further guidance on how to correct payroll submissions.

If employers are not able to make the amendment through payroll, they may submit a voluntary disclosure letter to HMRC, using reference “NICs Disclosure for Internationally Mobile Employees”. 

Our view

• This interpretation of the guidance is contrary to the technical position that was widely accepted and adopted across industry and in practice where liability to class 1 NICs was determined on an “all or nothing” basis at the point earnings arose.
• Our view is that this is a fairly unsatisfactory approach from HMRC, who have not addressed the fact that this new guidance represents a material change from standard practice. We are surprised that this approach has been taken with no change to the legislation. We note, for example, that HMRC have previously accepted disclosures on the “all or nothing” basis, and that other areas of the NICs legislation (such as in relation to employment related securities options) include specific provisions where apportionment is appropriate. There are wider implications for both employees and employers (particularly in relation to how this interacts with the application of social security agreements and domestic rules in overseas jurisdictions).
• In light of the above, whether it is appropriate to make adjustments to historic payroll submissions is not entirely straight forward and will depend on the facts. Please contact us if you would like to discuss this further.

Umbrella company tax rules

• HMRC have updated their Employment Status Manual (from ESM2400 onwards) to reflect the legislation to be included in the Finance Bill 2026 tackling non-compliance in the umbrella company market. 
• As mentioned in previous agent updates, the proposed measures include making UK agencies that supply workers to end clients jointly and severally responsible for the PAYE liabilities of the umbrella company that employs the relevant worker (or, in the absence of a recruitment agency, making joint and several liability attach to the end client). 
• The updated guidance largely reflects the draft legislation, but there are some examples in the HMRC guidance that practitioners may find of assistance, including examples of the application of the commencement rules (ESM2410) and identification of the relevant parties for determining joint and several liability under draft section 61Z of Income Tax (Earnings and Pensions) Act 2003 (ESM2425).
• Although the updated guidance is still subject to revision, it is useful as an indication of how HMRC are likely to implement these new rules. 
• To help understand implementation requirements and ensure compliance readiness, agencies and other parties in the supply chain can register for a webinar about labour supply chains featuring umbrella companies. The HMRC webinars will be held on 7 October, 21 October and 17 November 2025.