Plans to remove the employment allowance for large employers from April 2020 could impact on smaller firms.
This allowance provides employers with a reduction to their national insurance contributions (NICs) bill of up to £3,000.
Employers that claim the allowance can carry it forward from one tax year to the next, but that will stop from April 2020.
From that point, employers will only be eligible for the allowance if their total secondary class 1 NICs liability for the previous year is less than £100,000, while the allowance has also been reclassified as state aid.
Smaller employers may face issues due to the maximum amount of de minimis state aid they can receive in any three-year period.
Jon Stride, co-chair of the Association of Taxation Technician’s technical steering group, said:
“The reclassification of the employment allowance as state aid will have consequences for all employers, regardless of size.
“If an employer receives other forms of state aid, this may affect their ability to claim the employment allowance in the future.
“Small employers that receive grants or tax breaks because they are doing well will no longer be able to receive the existing reduction to their NICs bill.
“Employers need to ensure they have the capacity for the full £3,000 employment allowance within their de minimis state aid ceiling, regardless of how much they claim.”
Talk to us about the employment allowance.