Employment Allowance changes from April 2020
From April 2020 the employment allowance will only be available to businesses and charities with a National Insurance secondary class 1 liability below £100,000, in the previous tax year. This change will be made to support smaller businesses. The amount that can be claimed will remain at £3000.
Another significant change to the regulations means that the employment allowance will be regarded as part of the ‘de minimis State Aid’.
- EU State Aid rules have been designed to prevent any advantage granted by public authorities through state resources, to any company that could potentially distort competition and trade within the EU.
- De Minimis state aid rules exempt the government from this approval process if a scheme only gives a small amount of aid. For most employers who receive ‘De Minimis State Aid’ there is a limit of 200,000 euros over a three year rolling period.
- In practice, if the full amount of the employment allowance is claimed and it exceeds the de minimis threshold then the employer will not be entitled to the allowance.
As a result of these changes it will be necessary for employers to supply information to HMRC to ensure they are compliant with these new regulations. They will need to declare which sector they operate in and, of course, the amount of de minims state aid they have received and when.
HMRC also propose that employers will need to declare the following information through the Employment Payment Summary (EPS):
- That they have checked their national insurance secondary Class 1 liability for the previous year.
- That they have checked with connected companies to ensure they are eligible to claim the employment allowance
- That to their knowledge they will not exceed the relevant de minimis amount for state aid by claiming the full amount of employment allowance, that they are the only connected company to claim the allowance and that they are not aware of any reason why they may be excluded from claiming.