1 September 2010

• Start-ups in Greater London, South East and Eastern regions excluded from new employer NICs holiday scheme
• 6 out to Top 10 most deprived areas are in London
• Scheme to start on September 6 2010

Start-ups in many of the most deprived areas of the UK will be excluded from a new scheme whereby new businesses will be exempt from employer national insurance contributions (NICs) in their first year, says UHY Hacker Young.

Only new businesses set up between June 22 2010 and September 5 2013 outside Greater London, the South East and the Eastern regions of the UK will qualify for the “Regional Employer National Insurance contributions Holiday for New Businesses”. The scheme was announced in the Emergency Budget on June 22 2010 and will take effect from September 6 2010 to September 5 2013.

With many of the most deprived local authorities being located within Greater London, the South East and the East, the scheme will fail to provide support to many of those areas that need it the most.

According to the Economic Deprivation Index 2008, six out of the ten most deprived local authorities are in London with Hackney being the most deprived area in England. (See table below)

Southend-on-Sea, which is the third worst major town for new business creation in the UK and has one of the slowest economic growth rates over the last five years , will also be outside the scope of the NICs holiday.

Top ten most deprived local authorities on Economic Deprivation Index (EDI) average rank 2005

(Latest data available – Source: Communities and Local Government)

Comments Roy Maugham, tax partner in our London office: “By restricting the scheme to regions outside London and the South East, the Government is denying invaluable NICs savings to many of the businesses that would need them the most.”

“London might be generally seen as more prosperous than other regions, but it’s also home to six out of ten of the most deprived areas in England, including Hackney, Newham and Tower Hamlets. Similarly, the South East also has pockets areas, such as Southend-on-Sea, which are faced with a huge economic challenge.”

“Restricting the scheme offering by geography rather than by need is too rough a criterion. It means the scheme won’t be fair and won’t fully achieve its purpose. It seems to me that this is one of those policies produced in the rush of the Emergency Budget without too much thought about the details behind it.”

“At a time when every penny counts, new policies should be thoroughly thought out so as to achieve the best return on investment for taxpayers.” 

Roy also points out that the NICs holiday scheme was partly designed to help create private sector jobs in areas most dependent on public sector employment, which raises the question why places such as Portsmouth, Southampton and Southend-on-Sea, which have some of the highest concentration of public sector workers, should be excluded from the scheme.

Roy Maugham