National Insurance Holiday Scheme
The Isle of Man currently operates a National Insurance Holiday Scheme for certain new residents and students who return to work on the Island. Various qualifying conditions apply. The scheme commenced from 6 April 2019 and allows for a one-off refund of National Insurance (Class 1) deducted in the first year, up to a maximum of £4,000.
The scheme will apply to anyone who takes up residence in the Island on or after 6 April 2019 and who have not been resident on the Island for tax purposes at any time in the previous five tax years from the date they take up residence.
Returning Isle of Man Students
The scheme will apply to any Isle of Man student who, on or after 6 April 2019, successfully completes a full time course of education outside of the Island for a university first degree, a Higher National Diploma (or comparable course) or a postgraduate course and who, after completing that course, returns to the Island to live and work. It will not apply to students who have undertaken a course of distance learning or flexible learning.
In order for a new resident to benefit from the scheme they will need to commence residence on or after 6 April 2019 and commence permanent employment in the Island within 12 months of arriving.
A qualifying student will need to commence permanent employment within 5 years of successfully completing their course in order to benefit from the scheme.
An individual may benefit from the scheme if, within the required timescale, they take up employment that meets certain requirements, and in order to obtain a refund of contributions the employment must satisfy a number of conditions.
Full details are available in the Practice Note 207-19 and on the application form at R247 – Application for the National Insurance Holiday Scheme.
An individual may benefit from the scheme if, within the required timescale, they take up employment that meets the following requirements:
- It is permanent employment
- It requires the employee to work a minimum of 35 hours per week, except for any period the individual’s employer claimed Salary Support
- It is undertaken in the Island
- It provides a minimum annual gross salary of £21,000 or would have provided a minimum annual gross salary of £21,000 had the individual’s employer not claimed Salary Support and paid the individual a reduced salary (this requirement does not apply if the individual is a returning student)
A person who meets the requirements of the scheme will be able to apply for a refund of their Class 1 National Insurance contributions paid as an employee during the first 12 months of their permanent employment in the Isle of Man up to a maximum of £4,000. Contributions refunded under the scheme will still be treated as paid for all other purposes.
What is continuous employment?
To qualify for a refund, the person must remain in employment for a period of more than 12 consecutive months or 12 months which are not consecutive provided that Manx Earnings Replacement Allowance (MERA) was awarded for the entire period of any interruption in employment.
In addition, the employer must be Isle of Man resident for National Insurance purposes.
An individual can transfer to a subsidiary of the employer as long as the employment contract remains with the original employer.
What is permanent employment?
Permanent employment is an employment relationship which is expected to be continuing and has no predetermined end date.
Isle of Man student who, on or after 6 April 2019, successfully completes a full time course of education outside the Island for a university first degree, a Higher National Diploma (or comparable course) or a postgraduate course and who, after completing that course, returns to the Island to live and work. It will not apply to students who have undertaken a course of distance learning or flexible learning.
The graduation date has to be after 6 April 2019. Students who graduate prior to that date but do not return to the Isle of Man until after 6th April 2019 will not qualify for a refund.
Students at the Isle of Man University College will not qualify for a refund.
The application should be made after the end of the 12 months to which the claim applies, but not later than six months after that date.
New resident arrived on the Island on 31 October 2019 and commenced work on 1 November 2019 and continues to be employed. They can make their application in November 2020 but no later than March 2021.
Where the individual received a reduced salary as a result of their employer claiming Salary Support, the application should be made after the end of the 12 months to which the claim applies, but not later than twelve months after that date.
New resident arrived on the Island on 31 January 2020 and commenced work on 1 February 2020. They continue to be employed, however, their employer claimed Salary Support for April and May 2020 and paid them a reduced salary during this time. They can make an application in February 2021 but no later than January 2022. Their salary and working hours for April and May 2020 will be treated as if they had received their full salary and worked their full hours, however, their refund will be based on the total of actual amount paid.
Where the individual was awarded MERA, the application should be made after 12 months employment. The 12 months do not need to be consecutive provided MERA was awarded for any gap in employment. The application should not be submitted later than twelve months after the last month in the 12 months of employment.
New resident arrived on the Island on 30 November 2019 and commenced work on 1 December 2019. Their employer could not sustain their employment due to the Covid 19 pandemic. They were employed from 1 December 2019 to 31 March 2020. They were awarded MERA from 1 April to 30 June 2020. They began employment again on 1 July 2020 and were employed until 7 January 2021. They were awarded MERA from 8 January to 31 January 2021. They began employment again on 1 February 2021 and were employed until 2 March 2021. From 3 March to 30 April they were awarded MERA. They began employment again on 1 May 2021. They can make their application in June 2021 as they have an aggregate total of 12 working months (December 19, January 20, February 20, March 20, July 20, August 20, September 20, October 20, November 20, December 20, February 21, May 21) but not later than May 2022.
Copies of the relevant pay slips and documentary evidence of the Educational courses completed should be submitted with the application.
As a new resident you may be asked to provide proof of when you commenced residence such as providing copies of your travel documents, rental agreements or other similar documents to evidence when you arrived on the Island.
I arrived part way through a tax year, do I claim twice?
No, only one claim is necessary. The National Insurance refund can apply to two separate tax years depending on the date of application.
Applying for a refund
To apply for a refund form R247 - Application for National Insurance Holiday Scheme should be submitted to the Income Tax Division. Please note that early submission, before 12 months of employment, will not be accepted.
An employee to whom the scheme applies and whose employment meets the set conditions can apply to the Income Tax Division for a refund of the Class 1 National Insurance contributions they pay as an employee during the first 12 months of their employment up to a maximum of £4,000.
Where the person making the claim or a person connected to them has control over the employer either as a director or in another capacity, it will also be a requirement for the employer to be up-to-date with all Class 1 National Insurance contribution payments and all payments of Income Tax Instalment Payments in order for a refund to be made to the employee.
Will I receive the full amount refundable?
You will receive the full amount refundable unless you have an outstanding liability to Income Tax or National Insurance at the time of making the claim in which case the refund will be offset against that liability first before any remaining amount is refunded.