Employment Allowance Changes

From 6 April 2020 eligibility rules for claiming the Employment Allowance (“EA”) will change.

EA should be claimed through the Employer Payment Summary (“EPS”) in RTI, but claims will not renew, and a new claim will need to be made each year.

Two new conditions apply from 6th April 2020. These involve the level of employer’s national insurance paid in the previous year and a de minimis state aid check.

From 6 April 2020 EA can only be claimed EA if your total (secondary/employers) Class 1 National Insurance contributions (“NIC”) liability is below £100,000 in the tax year before the year of claim.

National Insurance on deemed payments on payments regarding off payroll (IR35) workers do not count towards the limit. Also, it is not possible to claim EA for these workers.

Where there is more than one payroll or there are connected companies, the aggregate contributions are taken into account for this test.

The second test relates to de minimis state aid.

From 6 April 2020 EA is treated as de minimis state aid. This type of aid is capped by reference to the aid received in a 3-year period

From 6 April 2020 EA will operate as de minimis state aid. This means it will contribute to the total aid you are allowed to get under the relevant de minimis state aid cap in the relevant 3 year period. The rules apply if the business engages in economic activity, providing goods or services to the market. It is not necessary to make a profit provided others in the market offer the same goods or services. It is considered that the rule will apply to most businesses claiming EA.

The rule will not apply to charities, community amateur sports clubs and those employing people to provide personal care.

The three-year period takes into account the tax year of the claim and the previous two tax years.

De minimis state aid and the relevant thresholds are worked out in euros. A written notification if other aid you have received was de minimis state aid. The letter should also state the amount of the aid.

If an individual or business, has not received this notification but believe it is de minimis state aid or wish to check, they should contact the administrator of that scheme.

The ceiling is expressed in Euros so should be converted into euros using the exchange rate for April of the relevant year.

The table shows the de minimis state aid ceilings for the relevant 3-year period. These are set by the European Commission.

Business sector

Ceiling

Primary production of agriculture products

€20,000

Fisheries and aquaculture sector

€30,000  

Road freight transport sector

€100,000  

Other, industrial (everyone else)

  €200,000 

Payrolling software will generally prompt for responses when processing under RTI.

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