Employment Allowance Reforms from 2020/2021 Tax Year
This is due to HMRC restricting the employment allowance to employers with a Secondary class 1 NIC’s liability in the prior tax year of less than £100,000. Any connected companies will need to combine all Secondary class 1 NIC’s to confirm if the employment allowance can be claimed.
Therefore, if your Employer’s NIC bill in the 2019-20 tax year is or exceeds £100,000, you don’t need to do anything and HMRC won’t offset the £3,000 allowance. If you still meet the same criteria from before and your Employer’s NIC bill didn’t exceed £100,000, you will need to submit an EPS each year you’re eligible to claim the employment allowance.
You will also need to confirm which economical sector your business is in or if you’re not involved in economic activity. The options you’ll need to choose form are:
- Agriculture
- Fisheries & Aquaculture
- Road Transport
- None of the above
- Or if you are not undertaking economic activities (charity for example)
A reminder of the reasons that you cannot claim the employment allowance:
- You’re the director and the only employee paid above the secondary threshold
- You employ someone for personal, household or domestic work (unless they’re a care or support worker)
- You’re a public body or business doing more than half your work in the public sector (unless you’re a charity)
- You’re a service company working under IR35 rules & your only income is the earnings of the intermediary
- NEW to 2020-21: Your Secondary class 1 NIC’s liability from the prior tax year are, or exceed £100,000
HMRC previously proposed employers confirming the amount of De Minimis state aid claimed but have since recanted this proposal due to the administrative burden it would cause. However, the employment allowance from 06 April 2020 will now be operated as de minimis state aid.
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