Employment allowance

The employment allowance is currently worth up to £3,000 pa per employer (or group of connected employers), although the Conservative Party promised to increase this cap to £4,000 pa, so watch out for a Budget announcement.

However, we do know that the scope of the allowance will be restricted from 6 April 2020 to employers who had class 1 NIC liability in 2019/20 of less than £100,000. This only applies to the employer’s (secondary) liability not to any employee’s NIC paid over by the employer to HMRC, or to class 1 NIC on deemed employments such as under the off-payroll working rules. The £100,000 limit applies to the sum of all class 1 NIC liabilities across a group of companies. Similarly, where the employer runs a number of payrolls the £100,000 applies to the sum total of class 1 NIC paid across all those payrolls.

Where our client has an employer’s NIC bill around that threshold it would be worthwhile reviewing whether it could be kept under £100,000 by delaying some bonuses to 6 April 2020 or later.

Remember the employment allowance can not be claimed by one-person companies, where the only employee is the director.

A further complication from April 2020 is that the employment allowance will count as de-minimis State aid, which has an upper limit permitted per business. This limit varies from €20,000 to €200,000 for two year period, depending on the sector the business operates in.

Claims for the employment allowance for 2020/21 will not automatically roll-over from the previous year. Each eligible employer (or their payroll agent) will have to make a specific claim on the EPS, for which they will need to know:

• Which trade sector the business operates in, out of:
  – agriculture
  – fisheries and aquaculture
  – road freight transport
  – industrial/other
• The amount of State aid received, or anticipated to be received, in the years 2018/19 to 2020/21
• Whether the amount of class 1 employers’ NIC paid for 2019/20 was £100,000 or more.

Payroll software should be updated to include fields for this extra information on the EPS. To avoid a delay making a claim for the employment allowance this information should be collected well before 6 April 2020.

Written by the Tax Advice Network