Preparing for changes to the Employment Allowance from April 2020

New eligibility rules for the Employment Allowance from April 2020.

Employers must make extra checks to work out whether they are eligible for the Employment Allowance from April 2020. A new claim for Employment Allowance (EA) needs to be submitted once each tax year, as claims will not automatically renew each tax year.

Employers’ (secondary) Class 1 National Insurance Contributions threshold check

  • EA can only be claimed if total qualifying employers’ (secondary) Class 1 NICs liability in the previous tax year was less than £100,000
  • if you have multiple PAYE schemes or are part of a connected group of companies, the Employers’ (secondary) Class 1 NICs liabilities of all companies, and/or PAYE schemes, needs to be added together to assess eligibility for EA
  • the allowance can only be claimed once across all your PAYE schemes and connected companies so you’ll need to decide which PAYE scheme to set the claim against.

By targeting the allowance in this way, it means that EA will be operated as de minimis State aid. De minimis State aid rules will apply if businesses engage in economic activity, this means providing goods or services to the market, which will apply to most businesses. Extra checks will be required if businesses have received de minimis State aid from other sources  and Employers must ensure that the relevant threshold for their business sector is not exceeded by receiving EA.

Claiming Employment Allowance

Employment Allowance will continue to be claimed through your EPS. By making the claim you are confirming you’ve assessed your eligibility for EA, and won’t exceed the de minimis State aid threshold. If your business is undertaking economic activity, you’ll need to provide your business sector(s) on the EPS – Agriculture, Fisheries & Aquaculture, Road Freight Transport or Industrial for everyone else. If your business is not undertaking economic activity – you’ll need to advise that State aid rules do not apply.

You can find more information on GOV.UK at https://www.gov.uk/guidance/changes-to-employment-allowance

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