Small Business Tax Advice: Employers Can Claim Employment Allowance From April, 2014.

It may not happen as much as we might like, but it’s good when our accountants are able to bring businesses a bit of good news.

Generally an accountant will spend a large proportion of time advising clients about deadlines that have to be met or taxes that need to be paid. The good news is that from April, 2014, many employers will be able to claim the new Employment Allowance. This new allowance will be especially beneficial to SMBs as they will be able to reduce their Class 1 National Insurance contributions, and thereby save as much as £2,000 each tax year. Here’s how the new allowance works.

Who can claim the new Employment Allowance?

Most business or charity employers can claim the Employment Allowance if they pay employer Class 1 NICs on their employees’ or directors’ earnings. The new allowance will also apply to Community Amateur Sports Clubs. However, the rights of businesses which belong to a group of companies or a charity which is part of a charities structure to claim the new allowance are restricted, as only one company or charity can claim the allowance. It is then a decision as to which company or charity will claim the allowance.

Who can’t claim Employment Allowance?

Certain businesses and charities will not be able to claim Employment Allowance. They will be ineligible if they:

  • employ someone for personal, household or domestic work, like a nanny, au pair, chauffeur, gardener or care support worker.
  • are already claiming the allowance through a connected company or charity.
  • are a public authority (this restriction also applies to local, district, town, and parish council).
  • Carry out functions either wholly or mainly of a public nature (unless you have charitable status), for instance;
  • NHS services.
  • General Practitioner services.
  • The managing of housing stock owned by or for a local council.
  • Providing a meals on wheels service for a local council.
  • Refuse collection for a local council.
  • Prison services.
  • Collecting debt for a government department.

Businesses are not classed as carrying out a ‘function of a public nature’ if they are:

  • providing security and cleaning services for a public building, such as government or local council offices.
  • supplying IT services for a government department or local council.

How do businesses/charities claim the new Employment Allowance?

Employers can use their own payroll software or HM Revenue and Customs’ (HMRC’s) Basic PAYE Tools to claim the Employment Allowance. When they make a claim they must reduce their employer Class 1 NICs payment by an amount of Employment Allowance equal to your employer Class 1 NICs due; but by no more than £2,000 per year. Once the claim for Employment Allowance is made, HMRC will automatically carry your claim forward each tax year. However businesses/charities need to ensure that if their circumstances change they contact HMRC and tell it about the changes.

If you’d like more information about the new Employment Allowance, or would like help claiming it, then contact Steven Glicher accountants on 0161 485 8007.

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