Another E106 question.

[Fiona]

Apologies if this has been covered before...

I have called Newcastle who tell me that, based on my 2007/8 earnings I am covered up to Jan 2010.  However, as I was contracting this year I set up my own Ltd company and am paid a minimum salary and the rest I deduct as dividends.  My accountant was going to pay the basic salary of £5435 - however on that salary I would not pay any NI contributions this year.  What Newcastle say is that I will have to earned at least £4,500 this year to qualify for the extra year on my E106.  But I was sure that you had to have made an NI contribution this year??  Is it because I have made full NI contributions in previous years?  So if my accountant does run a basic minimum wage for this tax year will I be covered or should I run a higher salary and make some contribution?  (will I need to make some contribution for my state pension??)

Thank you for you help

 

[AnOther]

I'm not sure I fully understand what you are saying but in basic terms the E106 entitlement is based on having paid 2 full tax years worth of qualifying NI in the previous 3 therefore whatever you may or may not have paid in the current tax year 2008/9 is not relevant as the tax year has not yet ended. By 'qualifying NI' I refer to normal PAYE employee contributions.

In practical terms then if you had paid qualifying NI for the tax years 2006/7 and 2007/8 then you should currently be entitled to an E106 which would run until Jan 2011.

Saying that you are entitled until 2010 seems odd because you have must have the aforementioned 2 full tax years to qualify at all and if you do then it's for 2 years which run from January to January. Timing is crucial so for example if you got one today it would run until Jan 2011 whereas if you'd got it say in Dec last year it would only run until Jan 2010.

Whether you are able to retrospectively adjust your 2008/9 earnings to a level where you paid NI I don't know. My gut feeling says no because NI is normally paid monthly and also to go back to the beginning of 2008 with a bigger salary has obvious implications for unpaid tax so definitely one for your accountant. Additionally there are some rules concerning self employed contributions and whether they count or not so be sure that it is going to work before committing to it. I'm not too well up on those particular rules I'm afraid.

PAYE NI normally includes the state pension contribution.

Hope this helps.

[cooperlola]

I too had a bit of a problem getting to grips with your scenario.  What I do know (from personal experience) is that the entitlement for those on a self employed "stamp" is a maximum of 18 months, not the 30 that those employed by others get. 

[Hereford]

I have no idea about forms E106 but (as an accountant) I can say that a directors salary is an employment not self-employment so no need to worry about self employed contributions when using a limited company.

Mrs H

[Fiona]

Sorry, it does seem like I have made my question quite confusing.....apologies.

Thank you Mrs H for clarifying that point.  Yes - I am technically employed and will be paid a paye salary.  Therefore in a nutshell.  I have been told so far that I have enough qualifying years to get me an E106 un to Jan 2010.  In this current tax year (ending in April), I will be paid a minimum wage salary.  I have been told by Newcastle I need to have earned a minimum of £4500 this tax year to get the additional year on E106 which would take us up to Jan 2011.  My question was really would I have to have paid NI contributons this year to qualify, if so how much?  They talked about having to make a minum "50 class 1 contributions" but I wasn't sure what this meant!?

thanks

[AnOther]

[quote user="Fiona"]My question was really would I have to have paid NI contributions this year to qualify, if so how much?  They talked about having to make a minum "50 class 1 contributions" but I wasn't sure what this meant!?[/quote]THIS site explains and yes, you would have to pay class 1 contributions for which your minimum salary would need to be £105/pw.

[Fiona]

Thanks Ernie....that's really helpful

Fi

[cooperlola]

Just to re-iterate, this is how the E106 entitlement is calculated:

"How they work :
> Form E106 is issued where a non-employed person transfers their  
> residence to another EC country, but has 'residual' entitlement to  
> Incapacity Benefit - Short Term (IBST). 'Residual' entitlement means 
>  that the contributions conditions governing the award of Incapacity 
>  Benefit are satisfied and if the customer had remained in the UK 
> and  claimed benefit that benefit would be payable. The duration of 
> E106  cover equates to the duration of IBST had the person claimed 
> the  benefit.
>
> E106 entitlement is awarded in line with 'Benefit Years' which run  
> from the first Sunday of January to the Saturday prior to the first  
> Sunday of January the following year.  We investigate the National  
> Insurance (NI) contributions record of the 3 complete tax years  
> prior to the Benefit Year in which a person leaves the UK. If those  
> tax years show sufficient NI contributions E106 entitlement is given 
>  to the end of the Benefit Year in which the person leaves the UK.   
> When entitlement is established this way we would look to extend  
> this by considering contributions paid in later tax years.  I have  
> set out below an example to illustrate this.
>
> A person leaves the UK on 1 July 2007 to reside in another EC  
> country.  The person worked for an employer paying earnings related  
> Class 1 NI contributions and ceased working on 30 June 2007. The 3  
> complete tax years prior to the current Benefit Year are those  
> running from 6 April 2003 to 5 April 2006. Sufficient NI  
> contributions were paid in those tax years giving initial  
> entitlement to 5 January 2008 (end of the current Benefit Year).  
> Sufficient NI contributions have also been paid in the 2006/2007 tax 
>  year to extend the E106 cover to the end of the next Benefit Year  
> which is 3 January 2009.  If, in addition, the person had earned  
> enough (approximately £4,350) to pay sufficient NI contributions  
> from 6 April 2007 to finishing work on 30 June 2007 the E106 cover  
> would extend to 2 January 2010. This would give total entitlement  
> from 1 July 2007 to 2 January 2010.  It would not be possible to  
> extend the cover beyond this point as NI contributions would need to 
>  be paid in the next tax year, which would not be possible as the  
> person would by then have finished working and would have left the UK.
>
> Forms E106 are issued under Article 19.1(a) of EC Regulation 1408/71."

[Fiona]

thank you very much Cooperlola

Fi

[Issysmum]

Hi,

Does anyone know whether you can 'top up' NI payments (ie. pay into NI even if you aren't earning) as I would like to move to France next year but have not been working since last May due to the fact that I had a baby last July.  I probably will not work again before we leave, but would like to apply for an E106 and am worried that I won't have worked enough to have made NI contributions that qualify me.  I am happy to make the contributions out of my own pocket - ie. not based on earnings.

Anyone have any ideas?

Thanks so much

Sharon.

[cooperlola]

My understanding is that voluntary contributions (which you can make to ensure a full entitlement to your UK pension) do not count towards E106 cover.  As you can see from the piece I quoted above from the DWP, this is a benefit based on work, not NI contributions.  I suspect this is because some of the money comes from employers' - not just employees' - contributions.  But somebody else may know differently.

[AnOther]

I would concur with that and it is explained here on the HMRC website

[Paddywack]

Why don't you register for self employment and pay self employed NI.

[AnOther]

I don't think a self employed stamp will qualify. My understanding is that it is nothing less than class1 or to put it another way, the benchmark is whether you are entitled to other benefits which is basically what Coops said.

THIS site tells you what you get for which class of payment and how much they cost you.