Employment Allowance was introduced in April 2014, to support businesses and charities by cutting the cost of employment.
Employment Allowance was however introduced the day after Statutory Sick Pay recovery was abolished. The £2,000 annual allowance was increased to £3,000 from April 2016.
Employment Allowance is claimed by eligible employers not paying up to the first £3,000 of secondary Class 1 (employer’s) National Insurance contributions (NICs), due per tax year, over to HMRC. Any unused allowance can not be carried over to the next tax year.
There have been changes to eligibility since Employment Allowance’s introduction. These have included Director-only payrolls no longer being eligible, but care and support workers becoming eligible.
The latest changes to Employment Allowance eligibility, from April 2020, concern employers with a secondary Class 1 NIC liability over £100,000 and/or those who have received state aid.
Your business or charity does not qualify for Employment Allowance if you answer “yes” to any of the questions below:
- Are you the director and the only employee paid above the NIC Secondary Threshold?
- Do you only employ someone for personal, household or domestic work (like a nanny or gardener) – unless they’re a care or support worker?
- Are you a public body or business doing more than half your work in the public sector (such as local councils and NHS services) – unless you’re a charity?
- Are you a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary (such as your personal service company, limited company or partnership)?
- Was your total (secondary) Class 1 NIC liability for 2019/20 £100,000 or above?
- Are you a connected company? Broadly, two or more companies are connected if one company has control of the other, or if they are under common control.
- De minimis state aid – In the relevant 3-year period, being 6 April 2018 to 5 April 2021, have you received de minimis state aid, including Employment Allowance and tax relief from R&D, that has exceeded the ceilings in euros below?
Business sector Ceiling
- Primary production of agriculture products €20,000
- Fisheries and aquaculture sector €30,000
- Road freight transport sector €100,000
- Other, industrial (everyone else) €200,000
If you believe that your business or charity does qualify for Employment Allowance, you should submit a new claim to HMRC from 6 April 2020. This is done through the Employment Payment Summary (EPS) in your payroll software.
Claims will not renew, so a new claim will need to be submitted to HMRC for each qualifying tax year.
You must keep any records that relate to your claim, for a minimum period of 3 years after the end of the tax year in which you claimed the Employment Allowance. Your records must show:
- why you were entitled to claim the allowance
- how much allowance was used or in some circumstances repaid
- what liabilities the allowance covered
Please speak to our payroll manager Michael Rivett to discuss how Robson Laidler’s payroll service could benefit you.