You can claim the Employment Allowance if you are a business or charity (including Community Amateur Sports Clubs) that pays Employer’s NICs on your employees’ (including directors’) earnings.
If your organisation belongs to a group of companies or charities, or you have associated companies under “common control” (effectively where the same person or persons controls more than 50% of each company), only one company or charity can claim the allowance.
You can only claim the Employment Allowance against one PAYE scheme – even if your business runs multiple schemes (also see the further guidance on claiming the Employment Allowance). It is up to you to decide which company or charity will claim the allowance.
Not all businesses are eligible for the Employment Allowance; please see the list of excluded employers at the bottom of this article for more information.
How to claim your Employment Allowance
You can use proprietary payroll software (such as Sage or Iris), or HM Revenue and Customs’ (HMRC’s) Basic PAYE Tools for 2014 to 2015 to claim the Employment Allowance. Remember, if you wish to buy Sage software, CRM can obtain a discount for you, so please check with us before buying.
When you make your claim you reduce your Employer’s NICs payment by the lower of your Employer’s NIC due and £2,000. The allowance is not split into 12 monthly amounts; you claim to eliminate the first £2,000 in the tax year.
For example, if your Employer’s NICs are £1,200 each month, in April your Employment Allowance used will be £1,200 and in May £800, as the maximum is capped at £2,000.
Once made, HMRC will automatically carry your claim forward each tax year. So at the beginning of each year you should check that your circumstances haven’t changed.
You will be able to see how much of the Employment Allowance you have used in ‘View PAYE Liabilities and Payments’ in HMRCs Online Service.
Exempt employers using HMRC paper returns
If you are exempt from filing, or unable to file online, you can claim the Employment Allowance, at the beginning of the tax year, using the paper Employer Payment Summary.
You cannot claim the Employment Allowance, for example if you:
- Employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker
- Already claim the allowance through a connected company or charity
- Are a public authority, this includes; local, district, town and parish councils
- Carry out functions either wholly or mainly (i.e. more than 50% of your income) of a public nature (unless you have charitable status), for example:
- NHS services
- General Practitioner services
- The managing of housing stock owned by or for a local council
- Providing a meals on wheels service for a local council
- Refuse collection for a local council
- Prison services
- Collecting debt for a government department
You do not carry out a function of a public nature, if you are:
- Providing security and cleaning services for a public building, such as government or local council offices
- Supplying IT services for a government department or local council
Personal and Managed Service Companies may not be able to claim the Employment Allowance, as you cannot claim the allowance for Employer’s NIC on any deemed payments of employment income under IR35 rules, only on actual salary paid.
The detailed guidance from the Gov.uk website contains more about excluded business types, eligibility, claiming, connected companies and connected charities can be found by clicking on this link: Detailed guidance
Reclaiming Statutory Sick Pay
There has much less publicity that with effect from 6th April 2014, the entitlement to recover Statutory Sick Pay (SSP) will cease. Up until 5th April 2014, you are able to recover SSP paid to your employees to the extent that it exceeds 13% of the Employer’s and Employees’ NIC for that month by offsetting it against the NIC paid over to HMRC. SSP for years up to and including 2013/14 must be reclaimed by 5th April 2016.
Recovery of Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption pay are not affected by this change.