Consultation on restricting the Employment Allowance

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 is undertaking a technical consultation on this legislation, with feedback requested by 20 August 2019. We would be interested in hearing from any charities that have secondary Class 1 NICs liabilities  £100,000 to assess the scale of the impact on the sector (although in practice it is a relatively small relief). HMRC estimates that 93% of all businesses remain eligible for the Employment Allowance.

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.

Tell us how you are affected