Is Er's NI allowance tax free

Is Er's NI allowance tax exempt from taxation, i.e. not subject to corporation tax

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Do you adjust your trading profits by subtracting Er's NI allowance to get to taxable profits?

Replies (25)

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By Leywood
01st May 2024 07:25

You appear to have forgotten the magic word ‘please’

What are your thoughts and where have you looked?

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Replying to Leywood:
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By 0717780
01st May 2024 08:07

Thank you for your reply and apologies for not saying please.

My thoughts are that the maximum amount of £5000 receivable as ER'S NI rebate is tax free. Some tax software appear to imply so and I was on a course where this was mentioned unless I am wrong...

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Replying to 0717780:
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By SXGuy
01st May 2024 08:18

ER NI receivable is tax free? Did they send you the money, or did it just simply reduce your ER NI liability?

You say does it reduce Corp tax, in what way would it?

Say your NI bill is 6k and you have 5k of ER NI allowance to use, what do you believe your ER NI liability to be in the books? You'd expect to net one off against the other and have a 1K liability id imagine.

In which case, where does the allowance come in to it with regards to Corp tax other than just that?

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Replying to SXGuy:
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By 0717780
01st May 2024 08:31

I would post the NI gross of £6k and Sundry income £5k. Then if say my net profit is £20k , after the NI and sundry income. I would subtract the £5k from the £20k to get to a PCTCT of £15k. Implying that, the £5k is exempt from Corp tax, which now I am having doubts as there is nowhere online which support this. Thanks again for your time

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Replying to 0717780:
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By Bobbo
01st May 2024 08:53

0717780 wrote:

I would post the NI gross of £6k and Sundry income £5k.

I'd say that's the first mistake.

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Replying to 0717780:
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By SXGuy
02nd May 2024 07:57

That's your mistake then.

6k of NI as an expense, but you've only paid 1k

5k of turnover when you've not received any of it.

While the net difference may get you to the same position you can see both your turnover and expenses are wrong.

6k ni paid down with 5k of ni allowance leaves you with 1k expense and 0 turnover.

Could be the difference between someone having losses to carry forward and someone paying tax when they shouldn't be.

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By I'msorryIhaven'taclue
01st May 2024 08:44

0717780 wrote:

Do you adjust your trading profits by subtracting [£5k] Er's NI allowance to get to taxable profits?

Only if you've included that [£5k] ER's NI charge in your trading profits in the first place.

I think most of us would exclude that [£5k] from both [trading profits and tax calcs]

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By Paul Crowley
01st May 2024 08:46

Why would you think it is tax free?

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DougScott
By Dougscott
01st May 2024 08:54

It's not money you receive therefore you don't show it as income and therefore it doesn't need to adjusted be for in the CT comp. You just put the NET employers NI (after deducting the allowance) in as an CT deductible expense. Well that's what I do anyway so there.

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By 0717780
01st May 2024 08:55

Because it is a rebate from the GOVT!!

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Replying to 0717780:
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By Paul Crowley
01st May 2024 09:02

NO!
It is not a rebate. It is an allowance that reduces a liability. You cannot get it paid, you have to use it to reduce a liability.

What tax software do you think 'implies' that it is a tax free item? How does it imply it?

That course you went on was rubbish, or you did not understand what was being discussed.

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Replying to 0717780:
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By Leywood
01st May 2024 09:25

You need to do some further reading on how NI allowance works.

Hint - the GOVT/HMRC/no-one will send you the cash!

Have you really done a course and if so which course?

Or are you trying to DIY?

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Replying to 0717780:
By JCresswellTax
01st May 2024 10:21

NO IT IS NOT!!!

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paddle steamer
By DJKL
01st May 2024 09:31

WAGES POSTING

Dr NIER
Dr Wages
CR PAYE/NI
Cr Net Pay Control

EA POSTING

Dr PAYE/NI
CR NIER

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By Postingcomments
01st May 2024 09:36

Wow.

Mind, posts like this explain a few things to me. eg Why the government might want to regulate the tax profession. Why so many on here seem incapable of noticing that they are not the only ones having problems with Iris and problems getting help.

It also makes me predict that it is not so much that AI will become awesome and start getting things right, it is more that the IQs and capability of humans are collapsing down to meet it. When the only staff you can find to employ spend the morning sitting around pondering things like this, you may as well get a computer to make a mess of it all. Same result but save the wages.

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Replying to Postingcomments:
paddle steamer
By DJKL
01st May 2024 10:24

Staff shortcomings regarding knowledge tend to be the fault of whoever supervises their work/trains them, they do need to be told what they need to know re each task assigned. (except those who get told something over and over and it does not sink in, they are in the wrong profession)

I suspect a fair few of us were lucky to be assigned to qualified staff during our training and they imparted a great deal of knowledge to us, maybe firm training these days and how it is organised is more at fault than staff.

I have a great respect for those who laboured instilling knowledge in me, either during my training contract re mainly accounts/audit or my first move to a smaller firm where I started also dealing with some tax compliance and payroll work, what gets amassed is a lifetime of increments. (until one starts forgetting a lot)

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Replying to Postingcomments:
paddle steamer
By DJKL
01st May 2024 13:22

What a............................

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Replying to Postingcomments:
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By Leywood
01st May 2024 13:31

Postingcomments wrote:

sanctimonious old know it all.

Inappropriate.

DJKL one of the nicest, most helpful on this site.

Have to say though, DJKL, staff members should be sponge like and take some responsibility for their own development.

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Replying to Leywood:
paddle steamer
By DJKL
01st May 2024 14:30

Yes, if it does not sink in then as I said, in wrong profession.

I do think a lot of us forget how useless we were when first starting out. (used to be said trainees lost firm money year 1, broke even re their costs year 2, made a profit for firm year 3)

Exams never seem to have cashbooks (well ICAS prelim did but you did not do that until a few weeks into training contract) and exam questions always started from a list of extracted transactions- first cashbook I ever saw I had not got a clue what I was looking at (Did not help it was a final salary pension scheme for a UK listed company so slightly away from the norm)

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Replying to DJKL:
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By Leywood
01st May 2024 14:49

I think some of the training companies have a lot to answer for. Ive seen trainers spoon feed students with answers so they are never left to actually think for themselves. Never mind some of the pitifully easy exams.

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Replying to Leywood:
paddle steamer
By DJKL
01st May 2024 15:07

Well up here ICAS did the training itself at either Edinburgh or Glasgow facilities, no idea what they do these days but it did give a fairly uniform experience (of course far fewer in training contracts than ICAEW, across the two facilities in any one year likely only 150-200 trainees in total each year in the mid 80s)

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By JCresswellTax
01st May 2024 10:21

How can an allowance be 'tax-free'?

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Replying to JCresswellTax:
DougScott
By Dougscott
01st May 2024 11:24

The OP appears to be an idiot who won't listen. He's certainly gone very quiet now!

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Replying to Dougscott:
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By FactChecker
01st May 2024 12:02

... and yet has been a member since 14th Dec 2000.
Doing what in what capacity unknown (but no posts in that 23+ years until today).

Looking on the bright side, we weren't asked whether a supplier's C/N (for as yet unpaid for goods) is exempt from taxation.

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RLI
By lionofludesch
01st May 2024 14:41

I vote no.

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