March 3rd, 2015  

If you’re an employer, you are likely to have received a letter from David Cameron telling you about the £2,000 allowance available to employers from 6th April 2014 for the 2014/15 tax year that can be offset against Employer’s National Insurance.  This allowance is also available for 2015/16 as well and has been introduced to support employers with their employment costs which in turn leads to promoting growth in the economy. Happy Days.

Exclusions:

Unless of course you are not eligible to claim the allowance – and there will be employers that have claimed the allowance without realising that they not in fact eligible. The main exclusions are:

Connected Companies: if two or more companies are under shared ownership then only one company can claim the allowance.  It can’t be claimed pro rata amongst the connect companies, so choose the company that will benefit most.
Domestic Staff: a payroll that has been set up for a nanny, cleaner, chauffeur etc isn’t entitled to claim the allowance.
Employers that are mainly in public services: if you carry out more than 50% of your work in or for the public sector you can’t claim.  If your business is in the public sector and you claimed the allowance at the start of the year, do review your sales by sector before the end of March to check that you’re still under the 50% threshold.
What is it?

The Employment Allowance is up to a maximum of £2,000 every tax year and is available from 6th April 2014. The Employment Allowance is offset against the employer’s secondary Class 1 NICs liability during a tax year. If the total secondary Class 1 NICs liability is less than £2,000 in a tax year, then the maximum Employment Allowance which can be claimed is the total of the secondary Class 1 NICs liability in that tax year. If the total secondary Class 1 NICs liability is greater than £2,000, then the maximum Employment Allowance which can be claimed is £2,000.

How is it claimed?

It is claimed via Real-time Reporting using the Employer Payment Summary (EPS).  You only need to send ONE Employer Payment Summary to HMRC.  The XML file sent will include the Employment Allowance flag so HMRC are aware you are claiming it.  There is no visual indicator on the submission, you just send a “blank” submission.

Essentially the amount isn’t claimed as such but is deducted from the month end payment to the HMRC.  This will be automatically deducted on your month end reports (both on your payroll software reports and on your HMRC gateway account) so that you pay the reduced amount to HMRC.

Help needed?

If you’d like assistance with your payroll or simply just want to have your payroll reviewed to ensure all is in order, please get in touch. I’ll be happy to help.