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The Association of Taxation Technicians (ATT) has warned that plans to remove the Employment Allowance for large employers could impact smaller firms too.

Currently, the allowance provides employers with a reduction to their national insurance contributions (NICs) bill of up to £3,000 a year.  This is all set to change from April 2020 however when large employers will no longer be able to claim Employment Allowance.

From April 2020, the allowance will be reclassified as state aid. This exempts the government from the approval process if a scheme only gives small amounts of aid. Under the new changes to the scheme, employers who have a NIC bill in excess of £100,000 for the previous tax year, will no longer be able to claim the allowance.

Employment Allowance will also have to be claimed every year in order to receive it. Relief will no longer be carried forward from one tax year to the next.

Please note that there will also be a number of administrative changes being introduced at the same time which is something that all employers should consider. Draft documents from HMRC indicate that in order to monitor compliance with the state aid rules and eligibility for EA, they will introduce a number of new compliance obligations for those who claim it.

While it was originally claimed that this would have minimal impact on micro-businesses and the majority of small employers, smaller firms are now being warned that they could in fact be affected. It’s thought that smaller businesses may face issues due to the maximum amount of de minimis state aid they can receive in any three-year period.

Jon Stride, co-chair of the Association of Taxation Technician’s technical steering group, commented:

“The reclassification of the Employment Allowance as state aid will have consequences for all employers, regardless of size. If an employer receives other forms of state aid, this may affect their ability to claim the Employment Allowance in the future.”

He continued:

“Small employers that receive grants or tax breaks because they’re doing well will no longer be able to receive the existing reduction to their NICs bill. Employers need to ensure they have the capacity for the full £3,000 Employment Allowance within their de minimis state aid ceiling, regardless of how much they claim.”

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