Employer’s National Insurance Holiday
In these difficult economic times, entrepreneurs may be deterred from starting a new business. Not only do they face a very competitive market, but a tonne of red tape- particularly surrounding employing people. And wages is generally the second largest expense for businesses (after their purchases or materials), which is exacerbated by ever increasing minimum wage rates and the one percent increase in National Insurance which was introduced this year.
But since June 2010, new businesses have been able to apply to HM Revenue & Customs (HMRC) for the Employer’s National Insurance Contributions (NICs) Holiday. Under the scheme, new businesses have the potential to reduce their employer’s NICs liability for a maximum of twelve months by up to £5,000 for each of the first ten employees they take on. So there is a whopping £50,000 saving possible!
Although HMRC have been sending flyers to new employers that request the New Employers Pack and have details on their website etc, only 3,002 applications had been received by 28 March 2011. So in this article, we set out the main criteria to qualify for the scheme in order to increase awareness of the scheme and save new businesses some cash.
Are you eligible?
The NIC Holiday may be available to the following types of Businesses:
- Sole trader
- Company
- Partnership
- Property/ Investment business
- Trading charity (regardless of whether it is profit making or not)
There is a time limit: the NIC Holiday may only apply to businesses that started up during the period from 22 June 2010 to 5 September 2013.
Business Locations: the NIC Holiday may only be available to businesses located in the following countries and regions:
- Northern Ireland
- Scotland
- Wales
- East Midlands
- North East
- North West
- South West
- West Midlands
-
Yorkshire and Humber
Complications and issues to be aware of
- It may not be obvious where the place of business is i.e. you may have multiple locations
- Some businesses may not be genuinely ‘new’
-
Some business sectors are excluded from NIC Holiday (because they do not qualify for de minimis State Aid), such as:
o Coal
o Road freight transport
o Businesses involved in export-related activities -
Certain sectors may not be able to claim the full £50,000 available (because they are entitled to a reduced rate of de minimis State Aid), such as:
o Road transport
o Agriculture
o Fisheries and Aquaculture -
All employees count towards the limit of ten employees- regardless of whether they:
o do not earn enough to trigger NIC deductions;
o are over pension age;
o are part-time or casual staff;
o have more than one job;
o are family members; or
o are directors - If you exceed the limit of ten employees during the scheme and some of them started on the same day, you are free to decide which of the employees counts towards the limit
- If your ten employees each have different start dates, you will need to keep separate NIC Holiday records for each of them
-
If you exceed the £5,000 employer’s NIC limit during the scheme, you must begin paying employer’s NIC deductions with your next monthly or quarterly payment to HMRC
Claiming Your Refund
With concessions and reliefs outweighed by austerity measures, businesses should be seizing every opportunity to save money with both hands. So if you think you may be eligible for the NIC Holiday, it can do no harm to apply for the scheme.
To apply for the scheme, you may complete a paper form which is available on request from HMRC’s New Employer Helpline (0845 60 70 143) or apply online at www.hmrc.gov.uk.
Alternatively your local TaxAssist Accountant can help you complete the application, and if your application is successful, the calculation of your deductions and any refunds you may be due. You will need the following information to complete your application:
- PAYE and Accounts Office Reference;
- Business name;
- Date business started;
- Business address; and
- Region/ country business address falls within from the list above.
You may also be interested in using HMRC’s NICs Holiday Recording Sheets which are available on their website www.hmrc.gov.uk. The Sheets help you keep employees’ start details, record their employer’s NIC deductions and summarise the total refund of employer’s NIC for up to two tax years.
Posted by Emma Clarke
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To find out more about specific tax planning tips that may be available for your business sector contact us today to speak with your local TaxAssist Accountant.
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