The Employment Allowance is a relief which entitles most businesses and charities to a reduction in their secondary Class 1 NICs liabilities of up to £3,000 per year.
The (Draft) Employment Allowance (Excluded Persons) Regulations 2019 restricts access to the Employment Allowance for a tax year to employers with secondary Class 1 National Insurance contributions (NICs) liabilities below £100,000 in the previous tax year. The purpose of this reform is to target the Employment Allowance to support smaller businesses.
From April 2020 the Employment Allowance will be administered as de minimis State Aid in order to ensure compliance with European Union State Aid rules. The instrument applies across the UK as NICs is not a devolved issue. HMRC has also published an explanatory memorandum and Tax Information and Impact Note.
HMRC undertook a technical consultation on this legislation, which closed on 20 August 2019. CTG submitted a short response to the consultation noting that charities reliant on a large workforce will no longer benefit from this relief, adding to the cumulative burden of taxation facing the sector. The CTG response also noted that for those charities with NICs liabilities below £100,000, they will in future need to consider their overall state aid limit, particularly if they are in receipt of other reliefs subject to State Aid, such as the Retail Discount.