There are 2 categories of staff recruited locally by the British Army ( Germany ). The largest category is Directly Employed Labour (DEL). These are people recruited directly from the local civilian population. The smaller category is Dependant Employees (DEP). These are people recruited from the spouses of soldiers and UK Based Civilians (UKBC).
Employment within the categories above is governed by the Status of Forces Agreement (SOFA). This is a treaty signed between Germany and the NATO members, who have troops in Germany (The Sending States). The issues associated with the SOFA and other legislation of concern to employment are as follows:
SOFA requires DEL to be employed under the terms of the Collective Tariff Agreement (CTA II). This is an agreement between the German trade unions, the German Government and the Sending States . Each year the 3 parties meet to agree revisions to the terms and conditions detailed in the CTA II. They also review the pay rates for the grades detailed in the CTA II.
SOFA allows the Sending States to employ their Military and accompanying civilian staff (The Civilian Component) under employment rules relevant to their own country rather than the CTA II. However the SOFA makes it clear that German citizens and anyone ordinarily resident in Germany cannot become members of the Civilian Component. Spouses of soldiers and UKBC entering Germany as Dependants never have official residence status in Germany so, provided they are not German Nationals, they can be employed as part of the Civilian Component.
As part of the Civilian Component, Dependant employees are regarded as Crown Servants and are exempt from UK Tax under Inland Revenue Board Order Section 28(5) of the Income Tax (Earnings and Pensions) Act 2003. However, we have been advised by HMR&C that an individual may be subject to tax on his/her Dependant salary on return to the UK if he/she does not remain non-resident in the UK for tax purposes in the year in question. Further information on residence status is available at Personal tax: Living or working abroad or offshore.
HMR&C has advised, however, that whilst all individuals should declare their Dependant earnings on their tax returns, they accompany any such declaration with the following statement:
“Exempt from UK tax under Inland Revenue Board Order made under Section 28(5) of the Income Tax (Earnings and Pensions) Act 2003.”
[Note this exemption only applies to monies paid as earnings by British Forces Germany . All other earnings from non-GEO LEC HR sources e.g. income from letting of property; investments; freelance work et al must be declared.]
As Dependant employees are exempt from paying UK Tax on their earnings, a P45 is not issued on termination of employment as a DEP, nor a P60, which advises of annual earnings in a given tax year and the amount of tax paid in year. Individuals are advised to inform new employers that they must complete a P46.
Although Dependant employees are not subject to UK Tax, they are subject to deduction of UK National Insurance contributions. Deductions, where applicable, are made on a monthly basis and paid monthly to HM Revenue and Customs under Tax Reference 948/MZ67527, which is a contributions based only tax reference number.
Dependant employees, who wish to claim UK Tax Credits, must declare earnings as a Dependant on their application.
