Employment Allowance – are you eligible?

HMRC Prime Minister David Cameron wrote to more than a million businesses and charities last week with the opening line ‘I am writing to you today about the new tax cut for businesses and charities that starts on 6 April’. Whilst the letter did say that the Employment Allowance ‘could’ reduce the NICs bill by £2,000, the overall impression of the letter is that it ‘will’ help businesses, saying ‘it will be easy to claim and all you will have to do is tick a box on your payroll software’.

I was overwhelmed with calls and E-Mails from clients that had received this letter. Businesses that believed they were ineligible were now of the belief that they were eligible because the Prime Minister had told them so. Further, they pointed me to television advertisements that had told them ‘whether you are a business big or small, the Government will give you up to £2,000 off your National Insurance’.

I had to point them to the small print:

The letters do say ‘you can check your eligibility and see more practical details online’, and
The adverts to have a small box that appears for 4 seconds saying ‘for exclusions see Website’.

Again, we strongly urge all employers to check their eligibility to the Allowance as at 06 April 2014. Whilst very many businesses will be entitled to this ‘tax break’, there are many that will not be – are you connected to another business, are you controlled by another business, are you dependent on another business?

Comment
Eligibility to EA is all about determining entitlement at 06 April each tax year. If there is a connection on this date, there is ineligibility for the rest of the tax year. However, this does not mean that such a connection will exist at the start of the following tax year. Therefore, we continue to suggest that companies and charities should review their eligibility on an annual basis.The letter and the adverts could be misleading, though it is highly commendable that the profile of the Allowance is raised. What they do not say is that incorrectly claiming money to which you are not entitled will result in your company having to repay HMRC and face the possibility of penalties and interest on the late payment.

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