HMRC Employment AllowanceDid you know that as an employer you can claim £3,000 every year against your Employer's National Insurance contributions?

Known as the Employment Allowance, it was introduced in April 2014 to encourage employers to take on more staff.  The Allowance was originally set at £2,000 but soon increased to £3,000 enabling employers to benefit for longer.

The Allowance is claimed through your payroll at the beginning of each new payroll year by submitting an EPS showing your claim.  However if you forget to claim it you are able to claim part way through the year and can also apply to HMRC for backdated Allowance if you have forgotten to claim in previous years.   

Not all employers are able to claim the Employment Allowance therefore it is important to know and understand the rules for claiming.  

Employment Allowance cannot be claimed:

  • If the director is the sole employee
  • The employee does personal, household or domestic work or is a gardener
  • The business is a public body or does more than 50% of its work in the public sector (unless it is a charity)
  • By a service company working under IR35
  • By more than one company if the company is part of a Group or if the companies are connected in any way (usually by having at least one director the same in each company)

The Employment Allowance can only be claimed against Employers Class 1 National Insurance up to the value of £3,000.  If your Employers NI contributions do not reach £3,000 in one year you cannot claim the difference.  If your Employers NI amounts to more than £3,000 in the first month you will use the whole of the Allowance in that month.

Claiming Employment Allowance is not complex but employers do still get it wrong or there situation is slightly more complex.  We have taken over payrolls where no Employment Allowance has been claimed, where Employment Allowance has been claimed on both companies even though there is an obvious connection between the two and when a company claiming Employment Allowance has been sold to a company which is already claiming Employment Allowance for another company within its group of companies.  

Employment Allowance can be claimed on different companies, although not in the same year, so it makes sense to always claim it on the company which will be able to use the whole of the Allowance.

Our payroll knowledge and experience ensures employers receive what they are due and do not get any nasty surprises when they are called upon some years later to repay Employment Allowance they were not entitled to claim!

Every year payroll becomes more complex, especially with the introduction of auto enrolment and the re-enrolments which are just around the corner.  Do you worry whether you are getting it right?  Try our payroll and auto enrolment service and you will worry no more.

Take a step away from your payroll worry and contact us today on 01722 341820.