The employment allowance has been a great help to small businesses and charities and this is set to continue, however the following changes take effect from 6 April 2020:
- In addition to the changes to eligibility listed below, there is a new requirement to make a new claim for the Employment Allowance each tax year, your previous claims will not renew and roll forward as they have previously.
- If your payroll scheme’s Employer National Insurance Contributions exceed £100,000 then you will no longer be eligible to claim the allowance. In theory, if you employ people on the average UK salary of £30,000 this is likely to only affect organisations with more than 33 employees, but you will need to review what your Employer National Insurance Contributions were for the 2019/20 tax year.
- The employment allowance will now be classed as State Aid, and therefore businesses will need to review the amount of State Aid they have received for the relevant 3 years to ensure claiming the employment allowance won’t take them over the State Aid ceiling for their industry. Therefore if you have been in receipt of any other funding which qualifies as State Aid you should consider your eligibility further by reference to the State Aid De Minimis limits for your industry. If you are only claiming the employment allowance you should be within the State Aid ceiling.
As per the existing rules, if your business has more than one payroll or you have a connected company, you will be required to look at the aggregate of all schemes’ Employer National Insurance Contributions when assessing if you have exceeded £100,000 and also other connected companies when assessing the level of state aid received. (Note: HMRC states a connected company, for these purposes, includes a group of companies or companies under the control of the same person or persons).
If you are in doubt about your eligibility or require assistance administrating your payroll, please contact one of our friendly payroll staff.