The Employment Allowance is about to get very complicated!

April 2020 sees a qualifying change to the Employment Allowance.

Originally introduced in April 2014 at £2,000.

Many employers benefit from the increased reduction of £3,000 on the employers secondary National Insurance liability. Only one PAYE in a group of connected employers can claim the allowance.

So in 2020, employers whose secondary NIC liability has exceeded £100,000 in the prior tax year will no longer qualify. Oh well, they can potentially afford to not receive the allowance.

For all others employers, the qualification now changes. Any current qualification ends after previously being continuous, and employers are now required to declare their qualification each new tax year – ‘fair enough’ some may say.

However, as only some employers now qualify, the allowance is now considered ‘state aid’ which, depending on industry type, has limits that cannot be exceeded.

Initial indications are that employers will have to declare via their payroll returns on a change Employer Payment Summary (EPS):

-that this PAYE scheme is claiming the allowance

-the employers industry type (this affects state aid entitlement), and

-the amount of state aid they have received as a group employer, wait for it, declared in Euro!

Failure to supply the detail annually will invalidate entitlement.

‘HM Revenue and Customs (HMRC) has published a draft statutory instrument and draft statutory notice for technical consultation with a draft explanatory memorandum and draft tax information and impact note

The debate on social media has already begun around the payroll profession and payroll software and service developers.

How much of a burden is this new requirement. Where will the industry type and stare aid values in Euro be captures from. Will the payroll operators know?

How suitable is the RTI EPS for reporting what are really none payroll state aid benefit values. How will employers know if they have qualified or not. How much will the software changes cost to develop and implement!

If you currently enjoy the benefit of the £3,000 allowance, will you be able to continue to claim the allowance in 2020. It is worth understanding this consultation and providing the contact on the consultation link and response.

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