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Removal of Employment Allowance

Removal of Employment Allowance

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Most "one-man" Companies have a Director paid just under the NIC contributions rate, but I have a couple where the Company does pay some employer's NIC.

The EPS to show eligibility for Employment Allowance was submitted when this first started, and I understand it rolls-on year to year.

As they are no longer eligible, what (if anything) now needs to be done to make sure HMRC don't think they are overpaying?

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By DJKL
21st Apr 2016 12:32

Certainly within Iris there is a tick box to claim EA .

HMRC guidance

"You only need to claim Employment Allowance once. If you stop being eligible, select ‘No’ in the ‘Employment Allowance indicator’ field in your payroll records."

https://www.gov.uk/claim-employment-allowance

I presume one would untick then maybe fire in a EPS (?) but to tell you the truth I do not know. I have one payroll in such a scenario so will find out.

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By marky74
21st Apr 2016 12:34

Moneysoft Payroll & Sage

In Moneysoft Payroll and In Sage there is a tick box which you untick.

Im pretty certain that you dont need to make another submission to confirm this.

 

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By DJKL
21st Apr 2016 12:40

How does communication work

marky74 wrote:

In Moneysoft Payroll and In Sage there is a tick box which you untick.

Im pretty certain that you dont need to make another submission to confirm this.

 

I am not sure how communication works.

You certainly first claim on an EPS, thereafter only FPS submitted each month on which employer NI reported.

Unless the FPS conveys the message to HMRC that you no longer wish to claim how does their system know not to match the EA against NIER for that month and thereafter?

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21st Apr 2016 12:41

Moneysoft produces an EPS with:-

Notifications

Claim NIC employment allowance = "no"

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By birdman
21st Apr 2016 12:50

Thanks, but I've just switched software..

I've just moved from IRIS to Brightpay, and there isn't a "not eligible" button to press, so presumably the "eligible" EPS from IRIS still stands? I can't untick from software I can no longer use, if you follow! I may of course have missed something in Brightpay, as it's new to me.

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By NH
21st Apr 2016 13:10

Brightpay

birdman wrote:

I've just moved from IRIS to Brightpay, and there isn't a "not eligible" button to press, so presumably the "eligible" EPS from IRIS still stands? I can't untick from software I can no longer use, if you follow! I may of course have missed something in Brightpay, as it's new to me.

I would contact Brightpay support - they are really helpful in my experience

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By NYB
22nd Apr 2016 11:30

Brightpay v Enabling NIC Allowance.

birdman wrote:

I've just moved from IRIS to Brightpay, and there isn't a "not eligible" button to press, so presumably the "eligible" EPS from IRIS still stands? I can't untick from software I can no longer use, if you follow! I may of course have missed something in Brightpay, as it's new to me.


I have used Brightpay for many years. When you go to produce your P30 under the HMRC tab you will find it says ENABLE Employers Allowance in blue. This year they have defaulted so you have to enable or not as the case maybe. They have done this purely to stop auto roll on of NIC Allowance.
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By jcace
21st Apr 2016 13:38

Brightpay

To notify of non-eligibility, go to the RTI section and click on "New", then new EPS. Select the Employment Allowance option and then choose "Indicate that employer is not eligible for Employment Allowance". Brilliant program :)

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By chatman
22nd Apr 2016 11:17

Moneysoft Payroll Manager gives you a warning that the employer might no longer be eligible, when creating the 2016/17 file.

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22nd Apr 2016 11:42

QTAC

With QTAC I had been told by them that the migration process from 2015/16 to 2016/17 would identify any such company. When I ran the migration process there was a generic message about this but the process in itself did not clear the emplayment allowance flag. When I opened the 16/17 s/w to run the payroll I got a query about clearing the flag for employment allowance Yes/No. As I had earlier received an error message with the migration I rang QTAC about the error message and to clarify the query on the employment allowance. The error message does not have any bearing on this comment.

As far as the query was concerned I was told to click Yes (so to clear the flag) and on the following screen No (not to send the EPS). So that's what I did but QTAC were wrong.

I leter ran the April payroll. I got notification that the ordinary monthly FPS had been sent but nothing about an EPS. I knew that an EPS was supposed to have been sent. I could see that in the XML directory on my computer that an EPS had been created but that there was no sign that it had been sent.

I got back in touch with QTAC. After quite a period of time it was sorted out and the EPS has been sent.

 

Any company who is affected by the cessation of employment allowance does need to check that an EPS has actually been sent and not assume it has. I suspect that the advice I had been given to click No re the EPS was wrong. The tax tab in Company Maintenance was still showing a tick in the Employment Allowance, that needed to be removed and the EPS sent.

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22nd Apr 2016 23:27

Just going through first payrolls of clients who aren't eligible for claiming EA and unticking as required on Moneysoft

Struck me that there's a couple of them at least might be taking on another employee later in the tax year. Are they then eligible to 'tick back in' for want of a better phrase or is it a case of once you say you aren't eligible at the start of the year you're out whatever ?

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23rd Apr 2016 08:41

You can restart the employment allowance during the tear

aj.adams, you are able to claim the allowance at any time during the year if the company takes on another employee during the year. You get the whole amount even if it's for part of the year. The HMRC guidance does say they must earn over the secondary threshold.
https://www.gov.uk/government/publications/employment-allowance-more-det...

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23rd Apr 2016 10:38

Thanks for the answer Laurence. 

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By kjevans
26th Apr 2016 17:11

What if the employee earns pays NIC but the director doesn't?

The guidance says:

A company is no longer eligible for the allowance if:

only one employee (or director) in the limited company is paid above the Secondary Thresholdthat employee is a director of the limited company

But it doesn't say if it is AND or OR.

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26th Apr 2016 17:52

Well that employee isn't a director. So the company qualifies.

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26th Apr 2016 17:59

What if the employee earns pays NIC but the director doesn't?

Kjevans, the guidance does infer that the restriction applies if the employee pays NIC but the director doesn't. Later in the guidance it says:
"If your company circumstances change and more than one employee or director earns above the Secondary Threshold, you’ll be eligible for Employment Allowance for the whole tax year."

However Statutory Instrument 2016 number 344 which brought in the change to the employment allowance includes this:

2 In section 2 of the National Insurance Contributions Act 2014 (exceptions), after subsection (4) insert—
Excluded companies
4A) A body corporate (“C”) cannot qualify for an employment allowance for a tax year if—
(a)all the payments of earnings in relation to which C is the secondary contributor in that year are paid to, or for the benefit of, the same employed earner, and
(b)when each of those payments is made, that employed earner is a director of C.”.
http://www.legislation.gov.uk/uksi/2016/344/regulation/2/made

 

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