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Employment Allowance

Employment Allowance

Could someone please explain the legislation to me. It says that where companies are connected only one can claim the allowance. Seems straightforward. It then goes on to explain what connection means - essentially common control. Again, straightforward. But this is the part that I don't understand:

Legislation goes on to explain how to confirm if companies are connected if there is no substantial interdependence (the factors for which are the usual ones). The problem that I have is that, having established that there is no such interdependence, I cannot find anything that says that companies that would otherwise be treated as connected are not so treated. It is fairly obvious that is the intention of the legislation, but that is not what it says. Am I just making a mountain out of a molehill?


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04th Mar 2016 12:18


Are these companies in the same trade ?  If not, you're probably grand.  If they are, you're going to have to share more information.

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By Ruddles
04th Mar 2016 12:27

My question is not whether the companies are connected but merely the seemingly poor drafting of the legislation.

Assuming that the companies are connected by common control, but have no substantial commercial interdependence (as defined), can someone point me to the part of the legislation that says that the connection can be disregarded. (As far as I can tell, the legislation just sets out how to establish whether such interdependence exists - it doesn't mention the consequences anywhere of it not existing, or are we expected just to infer those consequences?)

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By Matrix
04th Mar 2016 12:38

If they are connected by common control then you only need to look at interdependence if they are owned by associated persons, so relatives etc. If they fall into the usual definition of connected (so owned by the same person and not associated persons) then only one company can claim the allowance.

"Where 2 companies are only connected with each other through the attribution of rights between certain associated persons (eg relatives), the connected persons rule will only apply if the companies in question are substantially commercially interdependent. For example, when one company gives financial support to another, they have the same economic or commercial objectives and have common management, employees and premises."

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By Ruddles
04th Mar 2016 12:45

Thanks, Matrix

That document does explain, logically, how the rules work. Though the legislation itself still appears to be inadequate.

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04th Mar 2016 13:02

I disagree. I see paragraph 3 of schedule 1 of NICA 2014 as modifying the control tests of CTA 2010 sections 450 and 451 for the purposes of determining whether two companies are connected.

If you have established that the two companies are connected whether or not there is substantial commercial interdependence, then NICA 2014, section 3 seems unequivocal to me.

I think that the purpose of paragraph 3 is simply to say that for the purposes of sections 450 and 451 attributions of associates rights are only made if the the companies have a relationship of substantial commercial interdependence; otherwise they are not.

In effect, it is simply trying to introduce the now defunct CTA 2010, section 27 (et seq) rules into sections 450 and 451 for the purpose of the employment allowance.

The heading to paragraph 3 just does not really describe its effect.

EDIT: I was disagreeing with lionofwhatever. I do not think you are "grand" if the two companies are not in the same trade. I think if, without the attribution of the rights of associates, you can determine that two companies are under the control of the same group of irreducible persons, then the two companies get only one employment allowance between them.

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By Ruddles
04th Mar 2016 14:14


Got it now (indeed before Portia replied). I pride myself at normally being able to read and interpret legislation correctly. Not on this occasion, it would seem.

In the instant case, I have 2 client companies - one controlled outright by one brother, the other with a minority shareholding. The 2 brothers have a combined majority in the second company but neither has a controlling interest. If I am now reading the legislation correctly, the companies will be treated as connected for EA only if the substantial commercial interdependence exists.

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