Employers are being warned to check their entitlement to the Employment Allowance from April 2020.
For the 2020/2021 tax year, employers will only be able to claim the Employment Allowance if their total Class 1 National Insurance Contributions (the NI they paid as an employer not the NI they deducted from their employees) was less than £100,000 for the 2019/2020 tax year.
For those employers who are still eligible, the total amount of Employment Allowance that can be claimed is £4,000 for the 2020/21 tax year – an increase of £1,000 compared to the 2019/2020 amount.
Employers need to be aware that they will need to inform HMRC via an EPS (Employer’s Payment Summary) submission that they do qualify for the Employment Allowance on a yearly basis – it will no longer automatically roll over from the previous tax year as it has up until now.
Unfortunately, there are still exemptions for some employers and businesses who, although they did not have an Class 1 Employer’s NI bill of £100,000, are still not eligible to claim the Employment Allowance for 2020/21.
They are:
Employers of Nannies, Gardeners or other domestic staff (Carers or Support Workers DO qualify).
Sole Director Limited Companies (or if there are 2 Directors who are married but only one Director earns above the Secondary threshold for Employer’s NI).
Businesses who do more than half of their work with the public sector (ie. with the NHS or local council).
Service companies working under IR35 rules and providing their services via a limited company/partnership or personal service company.)
De Minimis State Aid
If your company receives de minimis state aid, from April 2020, the employment allowance (if you are entitled to it) will count towards your aid payments and must not be claimed if you have reached the state aid ceiling in the relevant period.
PLEASE NOTE: Although this is likely to only affect business sectors such as Agriculture, Fisheries and Road Freight, most payroll software will have additional boxes to tick to inform HMRC that you do or do not receive state aid within the EPS submission section.
These boxes will need to be checked appropriately when you send in your EPS submission to inform HMRC of your eligibility to Employment Allowance.
For further details on all aspects of the Employment Allowance and the de minimis state aid aspect, please visit:
www.gov.uk/guidance/changes-to-employment-allowance