From April 2020, HMRC are introducing new rules and processes for claiming the employment allowance.
Employers whose national insurance (NI) bill was £100,000 or more in the previous tax year are no longer eligible to claim the employment allowance. This means that from April 2020 larger employers need to ensure that the Eligible for Employment Allowance check box within the company settings isn't selected.
Employment allowance is now considered a type of State Aid. This is because it's essentially placing some businesses in an advantageous position over others which could potentially distort competition and trade within the European Union (EU).
What does this mean?
The change effectively withdraws the employment allowance for medium to large sized companies, with approximately 100,000 employers affected from the change. However over 99% of micro-businesses and 93% of small businesses will still be eligible for the allowance.
Regardless of the size of your company, you can't claim the employment allowance if:
- You're the director and the only employee that's paid above the secondary threshold.
- You employ someone for personal, household or domestic work, unless they're a care or support worker.
- You're a public body or business doing more than half of your work in the public sector, unless you're a charity.
- You're a service company working under IR35 rules and your only income is the earnings of the intermediary.
What do I need to do?
You don't need to do anything just yet. The changes to the employment allowance and all other legislation will be included in the new tax year update, which is going to be released early 2020. We'll keep you updated with what you need to do prepare for and process the employment allowance reform.
Where can I find help?
We'll be updating this article with more information when we have it, this will include what you need to do in your software and how to do it. We'll also keep you updated via the Sage 50cloud Payroll Advice Centre and your monthly payroll newsletters.