Employment Allowance
Prior to 5th April 2006 it was possible, subject to HMRC agreement to defer reporting and payment to 31st January following the end of the relevant tax year. From April 2006 employers have been required to include on the relevant year end return the best estimate of earnings by the 19th May (final FPS by 19th April under RTI) following the year end and submit any excess of the best estimate figures on a NICs Settlement Return by 31st March following the year end. Where the estimate proves to be in excess the employer may claim a refund. This arrangement applies where an employee is: • seconded abroad • non-resident and not liable to tax • paid UK earnings in excess of the annual Upper Earnings Limit and receives part of their earnings from a payroll abroad. EMPLOYMENT ALLOWANCE Introduced from 6 April 2014 onwards, up to £4,000 (£3,000 prior to 6th April 2020 and £2,000 prior to 6th April 2016) of Class 1 employer NICs per tax year does not need to be paid over to HMRC. Eligibility for Employment Allowance is complex but in essence it is available to: • employers, and • charities including community amateur sports clubs. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS It is not available to: • public sector employers such as local authorities, central government departments, prisons, NHS trusts, GP practices, state schools (independent schools and universities are usually charities so qualify) • businesses where there is only one person on the PAYE scheme and that person is a director/shareholder of the business. This will also apply if the second person on the payroll is earning at a rate less than the earnings threshold. Only one PAYE scheme may claim if the entity operates more than one scheme and the employer must choose the scheme it wishes to claim against, using the Employer Payment Summary (EPS) to set a marker to that effect which will remain in force for the tax year in question and subsequent years unless it is set to ‘No’. A claim for a different scheme can be made only at the start of a tax year. No printing, copying or reproduction permitted. The employer may take the allowance as soon as they have a Class 1 Employer NICs liability up to £4,000 (£3,000 prior to 6th April 2020, £2,000 prior to 6th April 2016). It can be claimed in instalments if that suits the cash flow of the scheme. HMRC will record the amount claimed. Employers who are convicted of using workers who do not have the right to live and work in the UK may, from April 2018, lose their Employment Allowance for a period of one year. From April 2020, eligibility for the Employment Allowance is restricted to employers whose total Class 1 secondary (employers) NICs liability was less than £100,000 in the previous tax year. In addition to this, also from April 2020, employers are required to declare that the addition of the allowance to any other amounts of state aid does not exceed the relevant EU de minimus state aid threshold. This was originally going to be a requirement for payroll returns, the EPS process, but has since been agreed that this is not feasible.
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