There is an exclusion from qualifying for the Employment Allowance, set out in s.2(4) NICA 2014, for employer's NIC paid under s.4A SSCBA 1992 in connection with workers supplied by service companies, but I find s.4A SSCBA 1992 incomprehensible, so would be grateful for advice.
Is s.4A SSCBA 1992 the only NIC charging provision for personal service companies subject to the IR35 rules on payment of salary to "workers" and hence, no company subject to the IR35 rules can claim the EA? Or is employer's NIC chargeable under the usual NIC provisions on the salary that must be paid to the worker under the IR35 rules and hence, they are not excluded, so IR35 companies can claim the EA?
If companies subject to IR35 can claim the EA, am I right in thinking that in working through the steps to arrive at the gross salary that must be paid to avoid a deemed payment, it is the total amount of Er's NIC which is deducted, not the Er's NIC after deducting the EA?
Any guidance would be much appreciated.
Related resources
Replies (4)
Please login or register to join the discussion.
I considered this a while back
I came to the conclusion that s.4A refers only to the deemed payment, which is after any actual salary. I think that bit probably makes sense.
I went on to conclude that, whilst s. 54 refers to the amount of NIC paid, it only makes sense if "paid" is taken to mean the amount that would have been paid, had the employment allowance not applied.
Otherwise if you calculated the deemed payment and then paid a salary of that amount, then, following on from the first conclusion, you would then revisit the deemed payment calculation and still get a deemed payment.
1. The charging section under SSCBA is s.1. S.4A expands the scope of 'earnings' defined under s.3 to include earnings by companies subject to IR35.
2. I would interpret s.2(4) NICA to mean that employment allowance cannot be claimed on 'deemed payment'.
3. Employment allowance will be available if a company hit by IR35 were to make real salary payments to the director. I would think that IR35 companies usually make salary payments to match the 'deemed payment'.
Edit: crossed with Steve's
Thank you, both
As the company is actually paying sufficient salary to avoid a deemed payment arising, I understand that the EA is claimable.
@Steve
I am probably being a bit dim, but I don't know what s.54 you are referring to. I think you are saying in your last two paragraphs that the Er's NIC to be deducted in the IR35 calculation is indeed the full amount of Er's NIC - is that right?
Yes
The s. 54 I was referring to is ITEPA 3003, s.54. (calculation of the deemed employment paymeny]t); step 6, in particular.
And Yes, I was meaning deduct the full employer's NIC before the EA has been deducted.