If you are an employer and currently claim Employment Allowance (EA) through your payroll then you need to be aware of changes coming in April 2020, letters are being sent out by HMRC to all employers who run a payroll scheme for their business.
We run payrolls for our clients and will be updating each scheme to ensure compliance with the new changes.
If you currently run your own payroll and would like either an assessment of your payroll to see if you meet the new criteria or would like us to take over and manage your payroll processing, please get in touch with us.
What is changing?
From April 6th 2020 you will need to make extra checks to work out if you're eligible for claiming the £3,000 annual Employers Allowance and submit a new claim each year, as claims will not automatically renew each year.
You will still be able to claim employers allowance through your Employer Payment Summary submission (EPS) but claims will not renew and you will need to make a new claim for Employers Allowance each year.
The checks you will have to make.
Employers' (secondary) Class 1 National Insurance Contributions (NICs) threshold
EA can only be claimed if your total qualifying employers' (secondary) Class 1 NICs liability in the tax year before the year of a claim, was less than £100,000.
Deemed payments
Employer (secondary) Class 1 NICs liabilities arising on 'deemed' employment (for example, off-payroll workers) do not count towards the £100,000 threshold and should be removed from your calculation.
Connected companies
If companies are connected, the total qualifying employers' (secondary) Class 1 NICs liabilities incurred by all of the companies in the group, in the tax year before the year of claim, need to be added together. If that total amount is £100,000 or more, none of the connected companies is eligible to claim. If the total is under the £100,000 threshold, you must decide which one company claims the EA.
More than one payroll
If you have multiple payrolls (or had multiple payrolls in the tax year before the year of a claim). All of the qualifying employers'(secondary) Class 1 NICs incurred by each payroll in the tax year before the year of claim should be added together. If the total is£100,000 or greater, you're not eligible to claim.
EA will be administered as de minimis state aid
EA will be operated as de minimis state aid. De minimis state aid rules apply if businesses engage in economic activity, this means providing goods or services to the market. It does not matter if you do not make a profit if others in the market offer the same goods or services, it's an economic activity.
In the case of this allowance, this will apply to most businesses.
This means that, before making a claim, you need to check that receiving the full amount of EA for that year, when added to another de minimis state aid (if any) already received or allocated In the claim year and previous two tax years, would not result In you exceeding the de minimis state aid threshold for your trade sector(s). If the total would exceed the threshold(s), you'll not be eligible to make a claim.
| Sector (economic Undertaking) | De Minimis threshold/ceiling
(set by the European Commission) |
| Primary production of agriculture products | €20,000 |
| Fisheries and aquaculture sector | €30,000 |
| Road freight transport sector | €100,000 |
| Industrial / Other | €200,000 |
There are some employers, for instance; charities, community amateur sports clubs, employing someone to provide personal care, who may not be engaging in economic activity and will be outside de minimis state aid rules. These employers will still be eligible for the allowance, but it will not be classed as a de minimis state aid in these circumstances.
Once you make a claim to the EA, and de minimis state aid rules apply to your business, you'll receive a letter to advise EA has been given under the de minimis state aid scheme, you'll need to keep this, as you may need it if applying for any other de minimis state aid.
If your claim is rejected, a Generic Notification Service (GNS) message will give you the reason, these should be received within 5 days and you'll need to advise your payroll administrator to remove EA.
You can find further guidance about Employment Allowance on the HMRC website Gov.uk