100TH ISSUE
103% small business relief (Yes, we know it’s not quite 100 but we’re doing it anyway)
Mathew Akrigg ACIPP, CIPP policy and research officer , provides key details surrounding the relief that eligible small businesses can claim for certain statutory payments
O ne of the things the CIPP’s policy and research team is passionate about is ensuring payroll processes and policies are fair for payroll professionals and wider businesses. Particularly for small businesses. With many processes, this focusses on ensuring reduced administrative burden, but there are also some policies which bring financial incentives for smaller businesses. Here, we’re going to explore the small employers’ relief of 103% (tenuous link to our 100th issue, we know) on statutory payment reclaims. This article is going to be a little bit like a factsheet, breaking down the eligibility you need to claim this rate and how you can actually claim it if you qualify. What can you get? Employers can usually reclaim 92% of their employees’: l statutory maternity pay (SMP) l statutory paternity pay (SPP) l statutory adoption pay (SAP) l statutory parental bereavement pay (SPBP) l shared parental pay (ShPP). However, some businesses may qualify for small employers’ relief, which means they can reclaim 103% instead. This is 100% of the cost of the statutory payment, plus an additional 3% compensation for the National Insurance contributions (NICs) due on the statutory payment. HM Revenue and Customs’ (HMRC’s) internal manual shows that the compensation rate for 2022/23 is
All this is great, but how do you get the money from HMRC? Thankfully, in most situations, it’s fairly simple. You calculate the amount of reclaimable NIC you’re eligible for and include this on your employer payment summary. Your payroll software should have the capability to do this, as does HMRC’s Basic PAYE Tools. There’s a chance you won’t be able to offset the payments against the current year’s liabilities. In such cases, you can instead write to the PAYE employer office at the start of the next tax year and ask for a repayment. The address is: National Insurance Contributions and Employers Office, HM Revenue and Customs, BX9 1BX.
3%. This manual can be accessed here: https://ow.ly/8znp50R2ZVI. With the main rate of National Insurance (NI) coming down to 8% in 2024/25 (a reduction of 33% from the 12% it was previously), will we also see the NICs compensation rate reduced in future? Eligibility rules You would be eligible to claim the small employers’ relief if you paid less than £45,000 in class 1 NI in the last complete tax year before the employee’s qualifying week, matching week, official notification week or relevant week. For the calculation, gross class 1 NICs used should exclude: l class 1A l class 1B l any NIC rebates. Importantly, this means you should ignore the employment allowance (EA) (if claimed), as it doesn’t contribute to the £45,000 threshold. By way of example, if you paid £48,000 in class 1 NICs, and claimed £5,000 in EA, this wouldn’t reduce the total down to £43,000 and so you wouldn’t be eligible for the small employers’ relief. Conversely, if you claimed £5,000 in employment allowance and paid £43,000 in class 1 NICs, you could claim the relief. If a business has been operating for less than 12 months in the qualifying year, then the threshold can be prorated. Take the total gross class 1 NIC liability in the operating months, divide by the number of months and then multiply by 12, to get your prorated amount.
Further considerations There are other situations in which
employers can apply for advanced funding, but here isn’t the right place to bore you with those details. However, if you are interested, you can find further information here: https://ow.ly/x2vL50R2ZAV. Unfortunately for small employers, the same isn’t true for statutory sick pay (SSP). This was reclaimable up until 2014 but that’s no longer the case. The CIPP has been working with the Work and Pensions Committee, delivering evidence in Parliament to highlight the fact that many employers would welcome the return of reclaimable SSP, especially given the increasing costs of employment. It’s promising to see this is something the Committee has suggested in its most recent report (this is discussed further in Payroll News, on page 12). n
| Professional in Payroll, Pensions and Reward | May 2024 | Issue 100 34
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