The Prime Minister has written to 1.25 million businesses in the UK stating that “the new Employer Allowance could take £2000 off your National insurance Contributions.”

The letter goes on to thank businesses for contributing to the up-coming success of the UK via our contribution to the economic recovery.

This includes many businesses in Torbay. Have you received one?

If so, you may need some assistance with registering your claim and ensuring you are eligible. The basic facts are:

The Employment Allowance is available from 6 April 2014. If you are eligible you can reduce your employer Class 1 NICs by up to £2,000 each tax year.

You can claim the Employment Allowance if you are a business or charity (including Community Amateur Sports Clubs) that pays employer Class 1 NICs on your employees’ or directors’ earnings.

If your company belongs to a group of companies or your charity is part of a charities structure, only one company or charity can claim the allowance. It is up to you to decide which company or charity will claim the allowance.

You can only claim the £2,000 Employment Allowance against one PAYE scheme – even if your business runs multiple schemes (also see the further guidance on claiming the Employment Allowance).

You cannot claim this allowance if you:

  • Employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker.
  • Already claim the allowance through a connected company or charity.
  • Are a public authority, this includes; local, district, town and parish councils.
  • Carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example:
  • NHS services
  • General Practitioner services
  • The managing of housing stock owned by or for a local council
  • Providing a meals on wheels service for a local council
  • Refuse collection for a local council
  • Prison services
  • Collecting debt for a government department.

You do not carry out a function of a public nature, if you are:

  • Providing security and cleaning services for a public building, such as government or local council offices.
  • Supplying IT services for a government department or local council.

Personal and Managed Service Companies who pay contract fees instead of a wage or salary, may not be able to claim the Employment Allowance, as you cannot claim the allowance for any deemed payments of employment income.

Service companies can only claim the allowance, if you pay earnings and have an employer Class 1 NICs liability on these earnings.

How Can I Claim?

You can claim this allowance via your 2014/2015 payroll software or HMRC’s Basic PAYE Tools for 2014 to 2015. We will do this for you if we manage your payroll services.

However, we recommend you speak to us to avoid any potentially costly and frustrating mistakes. Look forward to your letter!