Posted by James Pearson on 18 Oct 2013
From April 2014 a new Employment Allowance will be available for employers. This allowance is a flat deduction of £2,000 from the Employers National Insurance liability for every employer, regardless of the number of people they employ. The relief should be easy to administer and will be deducted over the course of the year through the PAYE system. Eligibility for the relief will be confirmed through the regular payroll process.
Employer Allowance Relief
The relief will be broadly available and should require a minimum of administration so it is worth making sure you benefit, especially since the relief is not intended to be a one-off relief and should continue to be available for future tax years.
Despite the headline flat rate relief of £2,000, in some cases, this amount of relief will not be available. If the employer’s National Insurance liability is less than £2,000 the allowance will be restricted to the size of the liability. It should also be noted that in some cases the relief will not be quite as generous as it appears to be. Since National Insurance is a qualifying expense for a business or company, a profit making employer will receive a £2,000 reduction in their NI bill, but will lose the tax relief they would have received for that £2,000 of allowable expenditure. A small company, for example, would lose corporation tax relief of £400, reducing the saving to £1,600.
The relief should be available for almost all employers, including companies, businesses, and charities. There are a few exceptions such as for workers provided by service companies, workers employed for purposes connected with their employer’s personal, family, or household affairs and workers employed by a business the ownership of which changed during the year. There is also an exception if the Employers Allowance is available to an employer because of a tax avoidance arrangement.
Employer Allowance Legislation
Legislation will also be in place to stop two connected companies or business from both claiming the Employers Allowance. Where two or more connected companies or business would qualify for the allowance, only one will be able to claim.
In most cases, we anticipate that this will be a simple and beneficial relief to claim. In particular, the £2,000 allowance will mean that an employer can take on a new employee on a salary of up to £22,400 without paying any additional employers NI. Alternatively, the salaries of existing staff could be increased by almost £14,500 (in total) without additional employers NI being due.
Contact Tax Innovations
If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or email@example.com
- Employee-Ownership Trusts
- Tax Relief For Residential Mortgages
- Penalties for Late Tax Returns
- Commonwealth Games – non-resident tax exemption
- Charging Capital Gains Tax on Non-UK Residents & UK Property