The Summer Budget 2015 contained two announcements affecting the employment allowance (EA).
Broadly, the EA potentially cuts every company’s NIC payments by allowing businesses and charities to offset up to £2,000 (2015-16) against their employer (secondary) NIC liabilities.
From April 2016, eligible employers will be able to reduce their employer Class 1 NICs liability by up to £3,000 per tax year instead of the current £2,000.
Secondary Class 1 NICs are ‘excluded liabilities’ and therefore do not qualify for EA if they are incurred:
- employing someone for personal, family or household work, such as a nanny, au pair, chauffeur, gardener. Prior to 6 April 2015 this category also included care support workers but from 6 April 2015 where all an employee’s duties are performed for a person who needs support because of old age, mental or physical disability or past or present alcohol or drug dependence, illness or mental disorder any Secondary Class 1 NICs are not ‘excluded liabilities’;
- on deemed payments of employment income for workers supplied by personal and managed service companies;
- by an employer who has had a business, or part of a business, transferred to them in the relevant tax year and the payments relate to an employee employed (either wholly or partly) for purposes connected with the transferred business, or part business; or
- as a result of avoidance arrangements.
The Summer Budget 2015 also announced that from April 2016 companies, where the director is the sole employee, will no longer be able to claim the employment allowance.