Employment Allowance – claim now!

20 June 2014

On 6 April 2014 the Employment Allowance came into effect – a new relief which means nearly all employers can save up to £2,000 of employer’s National Insurance Contributions (NICs) each year. The Chancellor of the Exchequer, George Osborne, wrote a letter to small businesses, to make sure they knew about the allowance and how to claim it but many businesses have ignored the letter as junk mail and are failing to make the claim.

The Employment Allowance can be claimed by most businesses or charities that pays NICs on employees’ or directors’ earnings. There will be some exceptions for employer Class 1 liabilities including liabilities arising from:

  • the carrying out of functions either wholly or mainly of a public nature (unless charitable status applies), for example NHS services and General Practitioner services.
  • a person who is wholly employed (wholly or partly) for purposes connected with the employer’s personal, family or household affairs.
  • employer contributions deemed to arise under IR35 for personal service companies.
  • ‘connected’ employers.  The employment allowance will be limited to a total of £2,000 where these are ‘connected’ employers.  For example, two companies are connected with each other if one company controls the other company.

The allowance is limited to the employer Class 1 NIC liability if that is less than £2,000 and is claimed as part of the normal payroll process.  The employer’s payment of PAYE and NIC will be reduced each month to the extent it includes an employer Class 1 NIC liability until the £2,000 limit has been reached. Employers can use their own payroll software to claim.  For most payroll packages, this only entails the ticking of a box on the payroll software. There are no regional restrictions.

So the message is check the junk mail and claim now! For further informaiton, please contact one of our payroll and bookkeeping specialists at your nearest location, or complete the contact form.