FCO is part of government tax judge confirms

30 March 2016

Andrew Hubbard 

An old joke for you. A man was wandering along Whitehall looking lost. A woman went up to him and said ‘Can I help?’ The man said, 'can you tell me which side the war office is on please?’ She replied, ‘ours, I hope’.

You can see that I have missed my true vocation as the natural successor to Eric Morecambe. So apart from bringing a little happiness into your life, why I am resurrecting a very old joke in this week’s tax brief? Because I was reminded of it in a remark from the judge in a recent tax case. He said ‘It seems to me that the Foreign & Commonwealth Office is clearly part of government’. Was there any doubt? 

Why did he say this? He was in fact dealing with a serious matter – the question of whether a police officer seconded to work in Kosovo was liable to pay National Insurance contributions. Police officers are not employees – they hold an office. For UK purposes the distinction is irrelevant because office holders pay PAYE and NIC in the same way as employees. But some international agreements only apply to employees. The agreement with Yugoslavia, which was held to apply to Kosovo, was in this category. If he was holding the office of constable while in Kosovo he was not covered by the agreement and hence not subject to NIC. But if he was employed in government service while in Kosovo he was subject to NIC.

He was on secondment with the Foreign & Commonwealth office. If it was part of government then he was caught. Hence the judge had to decide whether the FCO was part of government. Some Prime Ministers have speculated about the FCO’s ultimate loyalty but I think (indeed hope) that the judge came to the right conclusion.

The tax and NIC treatment of diplomats and government employees posted abroad is a complex topic with its own quirks – watch out next time you see me because I might corner you and start to explain how it all works.

If you would like any more information on this issue please contact Andrew Hubbard or your usual RSM contact.