The Employment Allowance has been with us for a few years, so it is perhaps now worth revisiting to ensure you are claiming on the correct basis. Remember you can make a backdated claim to cover the years from 2015/16.
The Employment Allowance is currently worth £3,000 as a flat rate deduction against the overall amount of employer’s NIC that is paid in respect of employees. However, there are some exclusions which are covered below. Moving forward, the 2018 Budget announced that from April 2020 this allowance will only be available to small businesses. HMRC defines a small business, for these purposes, as one whose total NIC liability is less than £100,000 in the previous year. We expect to see legislation later in the year with further details.
The current exclusions are as follows:
- Where two or more companies are connected; such as one company being under the control of another company or two companies being under common control (that is the shares in both companies being held by the same individuals), the Employment Allowance is available but it can only be claimed by one of the companies as decided by them.
The other exclusions relate to the types of business and as such the allowance will not be available where:
- The employer is a public authority e.g. a town council
- The employer carries out functions that are wholly or mainly of a public nature
- NHS, GP services
- The employer employees someone for personal, household or domestic work, such as a nanny, au pair, chauffeur or gardener. However, the allowance can be claimed in respect of domestic care and support employees, for example, a carer.
- There is only one employee and he is also a director of the company. Steps can however be taken in this particular situation if an additional employee is taken on board and either one is paid above the secondary NI threshold
In summary, if you believe you may be entitled to the Employment Allowance but have not yet made a claim, you can make a backdated claim to cover years from 2015/16. Please do not hesitate to get in touch with the DRG Chartered Accountants tax team, if you want to discuss this further.
DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.