Pensions, Employers, Employment Allowance

Last week we examined the changes to pension tax relief announced in the Summer Budget, and the increase in the NMW which employers will need to pay from October 2015 and April 2016. There were also some issues concerning the employment allowance, which we discuss below.



Employment Allowance

The employment allowance was supposed to be easy for all employers to claim;just tick box on the EPS and the allowance would apply for the current and allfuture tax years. But we know it hasn't been that straightforward.

Certain employers aren't eligible to claim the allowance if more than 50% of the business income is deemed to be public sector work - such as medical doctors(GPs) who work predominately for the NHS. Also where employees work in a domestic capacity in the employer's home the allowance is blocked. This covers;nannies, gardeners and domestic cleaners, but not carers who can qualify for the allowance from 6 April 2015 (not for 2014/15).

Some employers have found that their claim for the employment allowance for2015/16 has been ignored or removed by the RTI computer. Where the employer pays the amount of PAYE they believe is due, excluding the employers NIC covered by the employment allowance, HMRC have chased for the unpaid NIC. If this happens to your clients there is no alternative but to phone the HMRC employer's helpline to get the employment allowance reinstated.  

In the Summer Budget we learnt that the employment allowance will increase to £3,000 from 6 April 2016. This good news was tempered by a further block on the allowance for companies where the director is the sole employee.

We have no further information on this other than the announcement in the Budget red book. We hope that HMRC will provide clear guidance as to whether partnerships and sole-traders who employ a single worker will be affected by this block on the employment allowance - we assume not.

Where a company employs someone other than the director, perhaps the director's spouse, we assume the employment allowance will be claimable.However, there is no indication yet as whether the second employee will be required to be paid at a level that attracts employer's NIC. We will keep you informed when more details are released.

This is an extract from our tax tips newsletter dated 30 July 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>