Employment allowance query

Checking something re the legislation

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The legislation http://www.legislation.gov.uk/ukpga/2014/7/section/3 for the NI allowance says that connected companies at the beginning of a tax year cannot claim multiple lots of the NI allowance. Does this mean if a director of a company sets up another company (with a genuine separate business) during the tax year that the new company can still claim the NI allowance in the tax year the company is set up?

I would have assumed not but I don't know why the legislation makes a point of stating the beginning of a tax year.

Replies (4)

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By andy.partridge
01st May 2018 16:32

I suppose connected companies at the beginning of the tax year might no longer be connected companies by the end of the tax year.

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Replying to andy.partridge:
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By Paul Hawes
01st May 2018 16:46

Good point, my brain is dead this afternoon. I'm still not sure on my query though. If new connected companies weren't allowed the NI allowance shouldn't the legislation read something like "at the beginning of the tax year or a new company incorporated in the tax year"?

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By chicken farmer
01st May 2018 18:21

Bear in mind s. 2(4A) of NICA 2014 which denies employment allowance where the sole employee is a director/shareholder, which probably kills off what you had in mind?

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JCACE
By jcace
01st May 2018 21:28

As you correctly state, the legislation refers to companies that are connected at the start of the tax year. A company formed after the start of the tax year cannot be connected at the start of that tax year so could be entitled to the EA for the remaining part of that tax year, but may well then fail to be entitled for the following year(s).

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