Plans to remove the Employment Allowance from large employers could also impact smaller ones, the Association of Taxation Technicians (ATT) is warning.
From April 2020, the Employment Allowance, which currently provides employers with a reduction of up to £3,000 to their national insurance bill, will no longer be available to larger employers. As part of this change, Employment Allowance will be classified as a ‘de minimis state aid’. This could be problematic for small businesses, as there is a maximum amount of de minimis state aid they can receive in any three-year period. While the state aid rules are part of EU legislation, the Government have stated that they will be retained after Brexit, says the ATT.
Jon Stride, Co-chair of the ATT’s Technical Steering Group, said: “The classification of the Employment Allowance as state aid will have consequences for all employers, regardless of their size. Importantly, if an employer is already in receipt of other forms of state aid, whether by way of a grant or tax break, this may affect their ability to claim the Employment Allowance in the future.”
He added: “Small employers may find it unfair if, because they may be in receipt of grants or tax breaks because they are doing well or contributing something vital to the UK economy, they will no longer be able to receive the existing reduction in their national insurance bill.
“Employers need to ensure that they have capacity for the full £3,000 Employment Allowance within their de minimis state aid ceiling, regardless of how much of the allowance they actually claim.”
Even where small employers do not receive any other state aid, or have plenty of headroom within their state aid limit, they will have new compliance obligations from April 2020.
Stride said: “They will have to claim the Employment Allowance each year in order to receive it – relief will no longer be carried forward from one tax year to the next as it has been to date.”
Recent HMRC proposals also indicate that employers will have to provide extra information when claiming the Employment Allowance in future, including the amount of de minimis state aid they have received in the past three years.
“Employers should look to ensure they, and their payroll staff, are ready for the changes that will be introduced from April 2020, and have the information they need to ensure that they do not miss out on claiming the Employment Allowance,” said Stride.