The Employment Allowance
The Employment Allowance came into effect on 6 April 2015 and gave eligible employers a reduction of up to £2,000 in their Class 1 National Insurance Contributions (NIC).
Generally the allowance will be given by way of a reduction in employers NIC as it arises through the year, and once a claim has been made, via the employers payroll software, it will automatically be carried forward by HMRC into the next tax year. The allowance does not have to be claimed from the start of the tax year however, so is available to businesses that commence partway through the year. It can alternatively be claimed at the end of the tax year and a refund obtained.
A number of employers were not eligible to claim the allowance, such as if 50% or more of their work is of a public nature. Examples include NHS or general practitioner services, provision of meals on wheels or refuse collection for a local council or debt collecting for a government department (providing security, cleaning or IT services for a government department or local council is not considered to be of a public nature for these purposes).
Similarly the allowance is not available to personal, household or domestic workers such as a nanny, chauffer or care support worker or on a ‘deemed salary’ from a personal or managed service company.
Connected companies (broadly those with common ownership), or companies with multiple PAYE schemes, only receive one allowance but it is optional which company or scheme receives it.
Changes coming into effect on 6 April 2016
The allowance increases to £3,000 on 6 April 2016. The allowance will also become available to care support workers employed by their client.
In addition, if the company PAYE scheme consists of just one director who is the sole employee, then the employer will not be able to claim the allowance.
Care must be taken to ensure the allowance is not duplicated, over claimed or otherwise deducted when the employer is not entitled to receive it. If you have any queries regarding its availability please contact our Tax Director, Jenny Marks.
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