Employment Allowance Reform

5th March 2020

The Employer Allowance was first introduced in April 2014, giving employers a reduction of £2,000 against their Employer’s NIC bill.

 

This was further increased in value from April 2016 to £3,000 and in addition the scheme was reformed to exclude single-director companies.

 

It has remained at £3,000 ever since and is claimed via the payroll process, as the liability rises. It reduces the Employer’s (secondary) NI each time they run the payroll, until the £3,000 allowance runs out or the tax year comes to an end (whichever is sooner).

 

Eligibility up to 5th April 2020

 

Until 5th April 2020, business with employees can claim the Employment Allowance, unless:

  • The employee is employed for domestic duties, e.g nanny or cleaner
  • The sole director is the only employee paid above the secondary earnings threshold
  • The business is a public body or does more than half its work in the public sector (unless it is charity)
  • The company has deemed employments income under the IR35 rules

 

If your business is in a group of companies or has related companies under the same control, only one company in the group can claim.

 

 

Eligibility from 6th April 2020

 

From 6th April 2020, the employment Allowance will only be available to smaller businesses who has an Employer’s NI bill of £100,000 or less in the previous tax year.

 

Equally, if you have multiple payrolls (or had multiple payrolls in the tax year before the claim), all of the qualifying employer’s (secondary) NI incurred by each payroll in the tax year before the claim, should be added together. If the total is £100,000 or greater, you’re not eligible to claim.

 

The existing restrictions that are outlined above will also apply.

 

If your business is eligible, then you will have to notify HM Revenue and Customs via the Employers Payment Summary before you start to claim.

 

More information can be found at: https://www.gov.uk/claim-employment-allowance

 

For further information and guidance, or any other Payroll queries, please do not hesitate to contact your usual Whiting and Partners representative or call your local office to speak to our knowledgeable team of professionals.

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