Do you dream of growing your business in 2018 but you’re worried about the costs that come with employing more staff?

The NICs Employment Allowance grants employers relief of up to £3,000 per year on their secondary Class 1 National Insurance bill.

What is the Employment Allowance?

This government allowance was introduced in 2014 to support businesses and charities in the UK and to give them the opportunity to grow by cutting the costs of employment. In April 2016, the allowance was raised from £1,000 to £3,000 per year, meaning employers could claim an even greater reduction in their National Insurance Contributions (NICs) liabilities.

From community sports clubs to care workers, this allowance provides employers with the support they need for additional wage costs when growing their businesses. Once claimed, you will continue to receive the benefit each year automatically.

Your employers’ Class 1 National Insurance will be reduced each time you run your payroll, either until the £3,000 has run out or the tax year ends, depending on which comes first.

More than a million employers in the UK have received this allowance since 2014.

Who can claim Employment Allowance?

If you run a business or charity and pay employers’ Class 1 National Insurance, or if you employ a care or support worker, you could be eligible.

However, there are some restrictions. If you…

• Are the company director and are the only employee paid above the Secondary Threshold,
• Employ someone solely for personal, domestic or household work (other than a care or support worker),
• Are a public body or business which does more than half your work in the public sector (unless you’re a charity), or
• Are a service company working under ‘IR35 rules’ and your sole income is the earnings of the intermediary,

…you will not be able to claim the allowance.

If you are part of a group, then only one company or charity within the group will be able to claim. Companies with more than one employer PAYE reference can only claim against one of them. In both scenarios, we recommended you choose the business or PAYE scheme which is most likely to use up the majority of the allowance.

How can I claim Employment Allowance?

Employment allowance can only be claimed against Class 1 National Insurance to a limit of up to £3,000 each tax year. You are still entitled to receive the allowance if you pay less than £3,000 in Class 1 NICs per year.

There is also no set deadline for making your claim. You can claim at any point in the tax year through your payroll software. Simply tick ‘Yes’ in the ‘Employment Allowance Indicator’ next time you send an Employment Payment Summary (EPS) to HMRC. Alternatively, ask us to do it for you.

If you’re making your claim for employment allowance late in the tax year, you have the option to:

• Use your allowance against the Class 1 NICs you have already paid, or
• Use any unclaimed allowance to pay your tac or NICs owed at the end of the year (if you don’t owe anything on PAYE, you can use your allowance on VAT or Corporation Tax)

Can I claim Employment Allowance on previous years?

Yes. You can claim an allowance of £2,000 for previous tax years up to four years ago. You’ll need to submit a separate EPS for each year you wish to claim back, but it won’t need to include any EPS figures you have previously reported.

What if I claim Employment Allowance in error?

If you have made a mistake and claimed employment allowance in error, then your employer NICs may be calculated incorrectly. If this happens, you’ll simply need to repay the allowance you claimed wrongfully.

If you’re unsure whether or not you need to repay employment allowance, you can call HMRC on 0300 200 3500 or speak to your Burton Beavan accountant.

How do I stop my Employment Allowance claim?

Unless you cancel your claim, you’ll continue to receive the allowance each tax year. If circumstances change and you’re no longer entitled to Employment Allowance, all you need to do is tick ‘No’ in the “Employment Allowance Indicator” field on your next EPS to HMRC.

If you’ve already hit the £3,000 limit before the end of the tax year, you won’t need to do this.

If you stop employing people, you can select ‘No’ on your EPS in the next tax year.

What records should I keep?

You’re legally obliged to keep most financial documents for at least three years following the end of the related tax year.

You will need to be able to show:

• Why you were entitled to Employment Allowance,
• How much was used or repaid, and
• What liabilities your allowance covered.

If you’re interested in claiming Employment Allowance but are not sure if you are entitled, or if you have any other queries or concerns, speak to your Burton Beavan accountant today.

Your company and the employment allowance

If you want to talk to us about the Employment Allowance and the impact it could have on your business, please contact Burton Beavan on 01606 333 900 or email us at hello@burtonbeavan.co.uk.