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Restricting the employment allowance: draft regs

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At Budget 2018, the government announced its intention to restrict the NICs employment allowance to employers with a class 1 NICs liability below £100,000 with effect from April 2020. HMRC has now published draft regulations for consultation until 20 August.

The draft Employment Allowance (Excluded Persons) Regulations 2019 are published together with an explanatory memorandum, a draft statutory notice and draft tax information and impact note.

The draft legislation provides that employers with a class 1 secondary NICs liability of £100,000 or more in the preceding tax year will be ineligible for the employment allowance from April 2020.

The £100,000 limit will apply to the secondary class 1 NICs liabilities of individual businesses and in cases where there are connected employers, the cumulative secondary class 1 NICs liabilities for all those businesses.

From April 2020, the employment allowance will be operated as de minimis state aid. This means that employers must have space to accommodate the full £3,000 employment allowance within their available de minimis limit.

Employers will have to claim the employment allowance every year in order receive the relief, as it will no longer be carried forward from one tax year to the next. Those engaging in economic activity will also have to confirm to HMRC every year that their previous year’s employer secondary class 1 NICs liabilities were under £100,000, inform HMRC of the state aid sector in which they operate and notify any other state aid received.

This reform is designed to focus the employment allowance on those smaller businesses whom the allowance was originally intended to benefit. The employment allowance was first announced in Budget 2013, as an entitlement of £2,000 a year for businesses, charities, and amateur sports clubs towards their secondary class 1 NICs liability. This was increased to a maximum of £3,000 a year from April 2016, together with introduction of an exclusion for single director companies.

A final version of the regulations and guidance will be published in October 2019. See

Issue: 1449
Categories: News