From 6th April 2020 the eligibility rules for an employer claiming the Employment Allowance will change. Employers will have to check if they meet the correct criteria in order to check if they are eligible to claim the allowance. Some of the eligibility rules are as follows:
An employer can only claim the Employment Allowance for the tax year if their total (secondary) Class 1 National Insurance contributions is below the threshold of £100,000 in the previous tax year.
An employer cannot claim the allowance for deemed payments of employment income, as they are not included in the total cost of up to £100,000 for employers’ (secondary) Class 1 National Insurance contributions.
In the tax year before you claim if there is more than one payroll or connected companies the employer will need to add the total liabilities for employers’ (secondary) Class 1 National Insurance contributions for all payrolls or companies and only if the total liability is under £100,000 can one payroll or company claim the Employment Allowance.
An employer will have to check they will not exceed the de minimis state aid threshold, if applicable, as the Employment Allowance will be included as this type of aid. De minimis state aid rules apply to an employer if their business engages in providing goods or services to the market.
In Budget 2020 it was announced that the Employment Allowance will increase from £3,000 to £4,000 from 6th April 2020 thus helping to reduce the employers’ (secondary) Class 1 National Insurance contributions liabilities.
In the tax years before 2020-21 the Employment Allowance claim auto-renewed, as in the employer did not have to make separate claims every tax year. But this is changing from 6th April 2020 onwards. The method of claiming through the Employer Payment Summary remains the same but the employer will have to make a new claim for the Employment Allowance to HMRC each tax year.