With effect from 6 April 2014, HMRC is introducing an Employment Allowance, the effect of which is to reduce the amount of Employer’s National Insurance Contributions that an employer will have to pay in this tax year, by up to £2,000.
The maximum allowance available to your business is £2,000 or the total amount of the Employer’s NIC for the year if this is less than £2,000. For example, if the Employer’s NIC for the year totals £500, this is the maximum amount that can be reclaimed. If however the Employer’s NIC is £2,200, the amount that can be reclaimed is £2,000. Please note: the available allowance calculation refers only to Employer’s, and not Employee’s NIC.
Businesses that can claim
The Employment Allowance is available for most employers who pay Class 1 National Insurance Contributions on their employees’ and directors’ earnings, in other words Employer’s NI. This includes businesses, charities and community amateur sports clubs.
There are a small number of businesses and organisations that can’t claim Employment Allowance such as those employing domestic workers. For further details click here.
One important consideration is where a group of businesses are, or may appear to be, connected to one another, or where an organisation has more than one payroll scheme.
A business is considered connected if:
- a company has control of another company
- both companies are under the control of the same person/s
- if the same person/s control two or more charities which share the same purpose and activity
- both charities belong to a group
- a charity controls a trading business
If any of the above apply, only one of the PAYE schemes involved can claim the Employment Allowance and you are free to nominate which PAYE scheme can claim. It will be sensible to nominate a scheme with a large amount of gross salary involved if possible, to ensure you benefit from the allowance in full and as quickly as possible. Please speak to us or see the further technical information below for more detailed guidance on what ‘connects’ a business or charity.
If your business has more than one PAYE Scheme
It is important to note that if your business or charity has more than one PAYE scheme, you can only claim the Employment Allowance against only one of those schemes.
How to claim the allowance
To claim the allowance, the payroll is processed in the normal way and Employer’s NIC is still included as part of the payroll reports. When arranging payment of the liability due to HMRC, you must reduce the payment by the allowance available in order to recover the allowance.
If we process the payroll on your behalf, we will take into account the allowance available when advising you of the liabilities due to HMRC.
As ever, should you have any queries please do not hesitate to get in touch with us via your usual BKL contact or our online enquiry form.