The Government has published draft legislation for the new restrictions which will apply to the NI employment allowance (EA) from April 2020. Will your business be affected, and if so, how?
Employment Allowance (EA). Since April 2014, most employers have been entitled to a deduction from their Class 1 NI bill currently worth £3,00 per year. In 2020 some business will lose their entitlement to this and there will be general changes to the way that the EA works.
Draft Legislation. At the end of June HMRC published draft legislation covering changes to the EA. It’s subject to consultation until 20 August 2019 but it’s not expected that any of the main points will change, only some fine tuning to ensure that the legislation achieves what the government intended.
Key changes. All employers will be affected by the changes to a greater or lesser degree. The new EA conditions from 6 April 2020 are:
- you won’t be entitled to the EA if your liability to employers’ Class 1 NI in the previous tax year exceeded £100,000
- you won’t automatically qualify for the EA. You must claim it each tax year. This will involve submitting a declaration confirming that you’ve checked and are satisfied that you meet all the conditions for eligibility
- if you become connected with another employer, i.e. you share resources such as premises or staff, you must reassess your eligibility for the EA; and
- the EA will be state aid and counts towards the maximum aid (€200,000) you can receive in a rolling three-year period. You must have room to accommodate the whole £3,000 EA within the state aid limit or lose your entitlement to it.
The changes will affect all employers in some way. You’ll need to submit a declaration and claim each year. If your employers’ Class 1 NI bill for the previous tax year exceeded £100,000 you won’t be entitled to the EA.
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