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 National Insurance Contributions (NIC) is not a devolved issue. HMRC has also published an explanatory memorandum and Tax Information and Impact Note.
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 NIC liabilities below £100,000 in the previous tax year. The purpose of this reform was to target the Employment Allowance to support smaller businesses.
HMRC undertook a technical consultation on Employment Allowance legislation. 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. CTG’s response also noted that for those charities with NIC 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.
The regulations were not implemented before Parliament was dissolved for the General Election in late 2019, but were reintroduced as the the (Draft) Employment Allowance (Excluded Persons) Regulations 2020. A policy paper published by HMRC provides detailed guidance on the new rules.