How does the new Employment Allowance restrictions affect you?

New draft legislation has recently been published and will come into effect from April 2020. The new restrictions announced by the Government will apply to the National insurance Employment Allowance (EA). Avanti Group breakdown the new legislation and discuss what it means for you.

In the draft legislation, HMRC outlines the policy objective;

“This reform is designed to focus the Employment Allowance at the original intended beneficiaries: smaller businesses. That is why the relief is being removed from larger employers who incur employer secondary Class 1 NICs liabilities of £100,000 or more in the tax year immediately before the year of claim. “

2020 will see general changes to the way EA works as well as some businesses losing their entitlement to a deduction from their Class 1 NI bill which is currently worth £3,000 per year.

It is worth noting that ALL employers will be affected, to varying degrees.

Key Points

From the 6th April 2020, the changes are as follows;

• EA will count as state aid, and will be included in the maximum aid you may receive in a rolling three year period, which is £200,000, if you cannot accommodate the full £3,000 within this aid you will not be entitled to it.
• If your class 1 NI liability exceeded £100,000 in the previous tax year, you won’t be entitled to EA.
• You’ll be required to check if you are eligible and submit a declaration, there will be no automatic qualification for EA.
• If your situation changes and you become linked to another employer e.g you share resources, you will be required to reassess your EA eligibility.

HMRC anticipate that the measures will have a significant impact on approx 1.2 million businesses. Whether it be a direct financial impact due to eligibility, or understanding the legislation and its impact on business owners.

If you need help understanding the draft legislation, your eligibility and the potential impact for your business, don’t leave it until April. Contact Avanti (08000) 388 799 to get the right support in place. The Payroll team at Avanti are ready to help you.

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