The Employment Allowance was initially introduced in April 2014. Whilst minimal changes have been made to the qualifying criteria of who can claim the allowance in recent years, there is some big changes ahead of us from April 2020.
The current allowance amount is £3,000 per annum and this amount is offset against the employers National Insurance bill. Currently there is minimal restrictions which can impact your eligibility to claim the allowance but from April 2020 this will all change.
Employers who had an Employers NIC bill in excess of £100,000 in the previous tax year will no longer be able to claim the employment allowance.
This will have minimal impact on micro-businesses and the majority of small employers but effectively removes the employment allowance for medium to large sized businesses. This is a big change and will impact a large number of employers. With the introduction of this rule, the remaining criteria remains mainly unchanged.
You can’t claim Employment Allowance if:
- You’re the director and the only employee paid above the Secondary Threshold
- You employ someone for personal, household or domestic work (like a nanny or gardener) - unless they’re a care or support worker
- You’re 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
- You’re 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)
It also must be noted that only one PAYE Reference within a group of businesses can claim the allowance.
Have you identified that your business hasn’t claimed the allowance even though you were eligible?
You are able to claim for backdated years (currently restricted back to 2015/16 tax year) and this will need to be done before the 5th of April 2020. This can be done by submitting EPS submissions through your payroll software for the tax years in question.
Has your business been claiming Employment Allowance when you shouldn’t of?
HMRC is currently investing a lot of time in reviewing their records to ensure that employers haven’t incorrectly claimed the employment allowance. If you identify that your business has made an error, then this can be adjusted through your EPS submission within the payroll software and additional amounts will be due to HMRC.
For more information please contact Katy Christiansen (firstname.lastname@example.org) or your usual AAB contact.