[UK] Changes To Employment Allowance From April 2020

13 FEB 2020

On the 10th of February 2020 the government published guidance about the changes to the eligiblity criteria that will apply for the Employment Allowance from April 2020.  The claim is that this will help 'professional bodies provide updates to their members' and 'tax agents and advisers make sure their clients are ready for the changes'.

Therefore it is responsible for the Global Payroll Association to publicise this minimal guidance.  Firstly it is worth saying that all entitlements to the Employment Allowance will cease at the start of tax year 2020/21 and eligible employers will need to reclaim.

The guidance is structured in three parts: 

1 Before you make a claim

This section talks about the things that an employer will need to do to consider whether they can reclaim entitlement to the Allowance.  The first consideration is the value of Class 1 National Insurance paid for employees.

The second consideration is de minimis state aid that has been received and / or allocated.  This is because the Employment Allowance will be classed as a form of de minimis state aid from the 6th of April 2020.

2 Check your eligibility

This section deals with the fact that there is no eligibility if the total Class 1 NICs for employees is £100,000 or more in the previous tax year (2019/20).  Whilst it is not relevant in 2020/21, future claims will not take into account the employer’s Class 1 NICs on payments made to deemed employees (off-payroll workers).

Don’t forget that the rules on connected companies has not changed and employers still need to look at all of the companies in the group with which they may be connected.

3 De minimise state aid

This section deals with the fact that the Employment Allowance has been reclassified as de minimis state aid from April 2020.  For the employers that are eligible to claim (and NICs are below £100,000 across connected companies), they have to look at the de minimis state aid that they have received or have been allocated to make sure it does not breach the cap for their relevant sector.  If claiming the Employment Allowance will not breach the cap, the claim can be made.

Global Payroll Association Comment

The new guidance for employers says that the gov.uk guidance will be updated in April 2020.  This is far too late for employers, especially the ones that may be able to make a claim.

That is why we are pleased to have Ian Holloway from Cintra HR and Payroll Services talking about this subject at our UK Summit in March 2020.