even where the employer may not claim the full amount – this needs to be made clear in guidance as there is a risk that it could be double accounted for i.e. by the employer and then again by HMRC.
• There appears also to be confusion between the three year period to be assessed to be used, therefore we seek clarification as to whether HMRC will be using a three tax year assessment period (two preceding plus sufficient remaining to claim EA in the current year) or on a true rolling three year basis? • As Employment Allowance is claimed throughout the tax year – using tax years as a basis would be the most accurate. Rolling years risk an otherwise eligible employer becoming ineligible due to there exceeding the limits at a fixed point in time i.e. 6 April.
• Guidance needs to be crystal clear for all stakeholders.
Our comments assume also that the amount of de minimis state aid can be easily quantified and accounted for. This may not be an accurate assumption as we understand that in addition to grant payments that will be recorded within the accounts of the employer, other less tangible support may be provided to the employer. How will this be quantified by the providing public body? A significant bank of examples of such aid must be provided by HMRC in guidance to alert employers of how they could be impacted by such aid.
Impact of the £100,000 liability
The Employment Allowance has been in place for several years and employers will have a familiarity of what works for them. However, other policy reforms have been delivered, and continue to be delivered, since its introduction, such as off-payroll working rules. Guidance must include clear examples of when a Class 1 secondary contribution must be discounted, either in the calculation of the ‘less than £100,000 in the previous tax year’ or in the claiming of the £3,000 EA. Guidance must also provide clear explanations about all the circumstances in which a payment may be considered as deemed – and thus excluded either from the £100,000 liability and/or £3,000 EA claim.
Accounting for such exceptions through the payroll process will increase the administrative burden significantly – there should be no exceptions where a liability for Class 1 secondary NICs is accruing.
We are concerned that there is a growing inconsistency of applying policy in relation to Class 1 NICs. For example, the apprenticeship levy is calculated on all Class 1 liabilities, but the EA rules don’t follow this principle.
Is the £100,000 threshold inclusive or exclusive of the allowance? For example, if the secondary NIC in the relevant year amount to £101,000 but the employer only actually pays over £98,000 because of the £3,000 EA they claim, are they under or over the £100,000 threshold for next year's claim? This will be a commonly asked question and guidance should make clear the HMRC response that it is the amount before accounting for EA offset.
Acceptance and rejection communications
Once the employer has made their declaration HMRC will issue a letter by post informing them that they are granting de minimis state aid of £3,000 (we presume this will be stated in euros). This will ensure that HMRC is fulfilling its obligations under the EU rules for state aid provision. This assumes that HMRC agree that the employer qualifies and guidance will need to ensure that employers are made aware of this checking process by HMRC. Where HMRC disagree with the employer claim because information is missing or that the limits available to that employer appear to be in breach, we understand that HMRC will notify the employer by an electronic GNS message – this will not be an instant rejection message which raises further questions and further time needed to process the EA claim:
Where the employer processes their own payroll they will need to have access to clear guidance to prevent errors occurring which would result in an inaccurate rejection.
Payroll service providers will need to check each GNS for each client if a rejection is served. Will the GNS clearly identify which client it refers to?
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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