Employment Allowance Changes

Employment Allowance Changes- April 2020

 

From 6 April 2020 you will only be able to claim EA (Employment Allowance) if your Class 1 National Insurance bill was below £100,000 in the previous tax year.

 

Before making a new claim

From April 2020 you’ll need to make extra checks (explained below) to find out if you’re eligible to claim EA.

You’ll continue to claim EA through your Employer Payment Summary (EPS), but claims will not renew so you’ll need to make a new claim for EA each year.

Are you eligible?

From 6 April 2020 you can only claim EA if your total (secondary) Class 1 National Insurance contributions (NICs) liability is less than £100,000 in the tax year before the year of claim.

More than one payroll

Add together the employer’s (secondary) Class 1 NICs liabilities for each payroll, if you have more than one payroll (in the tax year before your claim).

If the total amount is:

  • £100,000 or more you will not be eligible to claim EA
  • under £100,000 you should decide which one makes the claim

Deemed payments

You do not need to include deemed payments in your calculations. Any deemed payments you make, such as to workers not on payroll, do not count towards the £100,000 employers (secondary) Class 1 NICs total. You can’t claim EA for these workers.

De minimis state aid

Check you will not exceed the de minimis state aid threshold

From 6 April 2020 EA will operate as de minimis state aid. This means it will contribute to the total aid you are allowed to get under the relevant de minimis state aid cap in the appropriate 3 year period.

If you engage in economic activity

De minimis state aid rules apply if your business engages in economic activity (providing goods or services).

You do not have to make a profit. If others in the market offer the same goods or services, it is still an economic activity and de minimis state aid rules will apply. So de minimis state aid will apply to most businesses claiming the EA.

If your business falls into de minimis state aid rules

You’ll need to make sure that you have space under your business sector ceiling (explained below) to get the full amount of EA available.

When you may not fall into de minimis state rules

You’ll not fall under the de minimis state aid rules if you do not engage in economic activity, for example, if you:

  • run a charity
  • employ someone to provide personal care.

However, you may still be eligible to claim EA.

Check other de minimis state aid you get

You’ll need to look at other de minimis state aid you got in the claim year and the previous 2 tax years. This is the relevant 3-year period.

Most businesses will not have received de minimis state aid before so will not need to do further checks to check if they are eligible for the EA.

How de minimis state aid and the relevant threshold are worked out

De minimis state aid and the relevant thresholds are worked out in euros. You should have been told in writing if other aid you have received was de minimis state aid. The letter should also tell you how much you got.

If an individual or business, has not received this notification but believe it is de minimis state aid or wish to check, they should contact the administrator of that scheme.

If not you should convert other aid you have received, and the full amount of EA for the claim year into euros using the exchange rate for April of the relevant year. You can then be sure you do not exceed the relevant de minimis state aid ceiling. 

Check the exchange rates you need. You need to make de minimis state aid calculations starting from tax years 2020 to 2021.

State aid ceilings

The table shows the de minimis state aid ceilings for the relevant 3-year period. These are set by the European Commission.

Business sector Ceiling
Primary production of agriculture products €20,000
Fisheries and aquaculture sector €30,000
Road freight transport sector €100,000
Other, industrial (everyone else)   €200,000

 

Free, confidential, no obligation meeting with a Chartered Management Accountant- to find out more about how the Employment Allowance works, please do not hesitate to contact us.

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