Reciprocal Agreement with the UK

Since 1948 the Isle of Man (IOM) and the United Kingdom (UK) have operated a reciprocal agreement, The Social Security (United Kingdom) Order 1977, covering both National Insurance Contributions (NIC) and contributory benefits (the Agreement).

The effects of the Agreement are to:

1. Treat the two separate social security schemes as one so that an individual moving between the two countries would be able to maintain entitlement to certain contributory benefits, namely State Retirement pension, Jobseekers Allowance and Incapacity Benefit
2. Treats the IOM and the UK as a single area for liability to NIC

Alteration with effect from 6 April 2016

A new reciprocal agreement, The Social Security (Reciprocal Agreement) (United Kingdom) Order 2016, removes state pensions from the 1977 agreement for those individuals who reach state pension age on or after 6th April 2016. This is necessary because the Isle of Man did not introduce a Single Tier Pension in April 2016 when the UK did so. The 2016 Agreement also covers voluntary National Insurance contributions.

The main effect of the new agreement is that people reaching state pension age after the 6th April 2016 who have paid NICs in the UK and NICs in the IOM are required to make separate pensions claims to each country. More information regarding this can be found on the Social Security Division's webpage under the heading Pensions.

Regarding voluntary NICs, there is now the ability to apply to pay voluntary contributions to improve pension entitlement in one country while paying compulsory contributions to the other country, so building up pension entitlement in both countries. However voluntary contributions cannot be paid to both countries at the same time. This brings the reciprocal agreement with the UK in line with reciprocal agreements with other countries regarding voluntary contributions. Details on Social Security reciprocal agreements with other countries can be found on the Social Security Division's webpage under the heading Reciprocal Agreements with other countries.

Alteration with effect from 6 April 2019

With the introduction of the Manx State Pension from 6 April 2019 an amendment was made to the 2016 Order, The Social Security (Reciprocal Agreement) (United Kingdom) (Amendment) Order 2019, to recognise the new pension and ensure that the changes intruded from 6 April 2016 extended to the new pension.

Court Case

In 2012 the Agreement between the Isle of Man and the UK was subject to a legal challenge by an Isle of Man resident employer who argued that the agreement could not impose a liability on them to pay employer NI for employees working in the UK.

Following an appeal to the Staff of Government Division of the High Court of the Island in July 2012 it was confirmed that the IOM employer was indeed liable to pay employer NIC for employees in the UK and the employer was required to pay the arrears of outstanding NIC.

Details of the appeal can be found on the Judgments.im website.

Consequences of failure to deduct the correct amount of NIC

Employers should be aware that failure to deduct the correct amount of NIC at the right time can result in the employer not only having to pay the employer NIC but also the employee NIC as well. (See Schedule 1 paragraph 3(1) of the Social Security Contributions and Benefits Act 1992, as applied to the Island)

Directors of companies which are employers in the IOM are reminded that, under the provisions of the Social Security Administration Act 1992 (as applied to the Island), they can be held personally liable for any unpaid NIC liabilities found to be due.