Business News
NICs holiday for new business
A recent announcement by the new coalition government that sparked discussion was the planned introduction of a regional employer NICs holiday for new businesses.
During a three year qualifying period new businesses within certain areas of the UK will be entitled to a substantial reduction in their employer NICs.
A good thing surely? However, a major concern is that the expected roll out date is the 6th September this year and some businesses have yet to receive guidance from the HMRC about how they are process and account for this new NICs element.
We have been told that a draft clause and a technical note will be published at the end of August and that more detailed guidance will be available by the 5th September (yes, one say before the expected roll out date!), but in the meantime we have put together an informal guide that should see you through:
• The rules state that to be eligible, a business must be a new employer as of 22nd June 2010 (Budget Day). For the first ten employees in the first year of business (before 5th September 2013), businesses can claim up to £5000 employers NICs per employee. The first year starts from when the company starts trading, not from its registration with HMRC or Companies House. Therefore, if there is a change of status or if you’re a sole trader already in business who takes on an employee on or after 22nd June, you will not be eligible.
• Employers will need to register with HMRC and then send an additional paper return by 19th May detailing how much of the NICs due they have not paid under the scheme.
• No software changes are required as returns will not change and calculations will not change.
• Withholding NICs due can start from 6 September 2010. Employers should calculate NICs as usual and all returns as though NICs are taken. Agents and bureaus may need to think about BACS payment of statutory payments as a registered employer would want to reduce the value due. End of year returns will have a manual supplementary P35/NICs Holiday Return, with standard P35 showing as though NICs were paid.
• The main issue for agents is determining if someone is eligible, but employers should have received a letter from HMRC confirming that they are. It will be up to the employer to determine if eligible – you must then apply to HMRC for confirmation.
• Compliance teams will carry out normal checks to ensure correct usage by employers. HMRC will cross reference registered companies before issuing any notices of shortfalls in monies paid against due.
• The legislation will probably not be complete before the first claims are submitted, so it will be made clear that they may have to pay what was deducted if legislation changes.
• If employers want to wait for legislation to be set before submitting their claims, they can backdate them.
• A national insurance bill will be required.
As with any new legislation, concerns have been raised by many key figures across the industry, most importantly:
• There is a potential risk that some employers will keep quiet about their first few low paid employees and then apply the legislation to their first ten higher paid employees.
• It is not clear what will happen if there is a change of location.
• Agents might insist on seeing an eligibility certificate if making payments to HMRC, although the IPP suggest that agents do this anyway as a matter of good practice.
