The employment allowance
Vincent Ashall, of VA Payroll Services, explains the rules and implications for making a claim, and identifies areas of concern
I
n the 2013 Budget, the Chancellor announced the introduction, from April 2014, of the Employment Allowance (EA) to “…help create jobs and back small businesses…” The EA is worth up to a maximum of £2,000 per annum to employers who are eligible to claim the allowance. The EA is claimed by employers reducing their secondary (employer) Class 1 national insurance contributions (NICs). If an employer does not pay any secondary Class 1 NICs, for example because all employees’ earnings are below the secondary threshold, then that employer is not entitled to any EA.
How to claim
An employer notifies HMRC that the EA is being claimed by completing the ‘Employment Allowance Indicator’ field on the real time information (RTI) employer payment summary (EPS). This field only needs to be completed
once. HMRC will then automatically carry forward the EA claim from one tax year to the next. HMRC interprets completion of this field with ‘No’ during the tax year as meaning no EA is due for that year. Therefore any EA claimed in that year would need to be repaid.
Having indicated that the EA is being claimed, the employer then reduces the
...EA IS NOT AS WIDELY AVAILABLE AS THAT IMPLIES
32 PayrollProfessional
Class 1 NICs due to be paid over to HMRC for the tax month by the amount of the EA for that same tax month. Thus, the EA cannot be greater than the secondary Class 1 NICs or £2,000, whichever is the less, for the tax month (but see below where the EA claim is not made from the start of the tax year). For large organisations, this may mean that all the EA is claimed in one go in tax month one if the secondary Class 1 NICs for that month are at least £2,000. For smaller organisations, the EA may be claimed over a number of months or over the whole tax year. For example, an organisation with a secondary Class 1 NICs liability of £200 per month will have used its EA by tax month ten; an organisation with a liability of £150 per month will claim £150 EA each tax month and will only be entitled to an EA of £1,800.
Who can claim? The EA is available to businesses or charities (including community amateur sports clubs) that pay employer Class 1 NICs on their employees’ or directors’ earnings.
However, the EA is not as widely available as that implies. Where businesses or charities are ‘connected’, then only one of the connected businesses or charities can claim the EA, even though there may be multiple pay as you earn (PAYE) schemes in operation. In this situation, one of the PAYE schemes should be nominated by the employer as the one that is going to claim the EA. This should be the scheme that is most likely to have at least £2,000
of secondary Class 1 NICs liability during the tax year.
Excluded employers With regard to connected businesses and charities, only one of the connected businesses/charities can claim the EA. However, there are other businesses that are also excluded from claiming the EA. These include: l those who employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker l public authorities; this includes local, district, town and parish councils l those carrying out functions either wholly or mainly of a public nature (unless they have charitable status), for example: m NHS services m general practitioner (GP) services m the managing of housing stock owned by or for a local council m providing a meals on wheels service for a local council m refuse collection for a local council m prison services m collecting debt for a government department. HMRC gives the following example of a service which is mainly of a public nature.
Example – The local surgery has five GPs, two nurses, three receptionists and a cleaner. The GPs are all partners in the practice. NHS patients make up 90% of the GPs’ work. There is no entitlement to the Employment Allowance because the majority of the work done is wholly or mainly of a public nature.
technical
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56