Employment allowance is a very small topic in a ACCA UK Taxation syllabus but the students who don’t know much about this allowance can this blog is for you. We believe that ACCA UK taxation is not just for exam passing. If you take little more interest than Taxation can be your career and can reward you with a great lifestyle and satisfaction.
So let’s start with the knowledge of Employment allowance.
Employment allowance is a benefit to the small and medium sized employers. HMRC wants to reduce the salary cost of those employers.
Eligible employers will get reduction in their NIC class 1 liability by £4,000.
The allowance increased to £4,000 from 6 April 2020. It was previously £3,000 from 6 April 2016 to 2019-20.
Eligibility
It’s available to businesses and charities but the total employers’ Class 1 National Insurance liabilities for the group must be less than £100,000.
If company is part of group of companies then combine Class 1 liabilities should be considered. And in the case of group only one company will going to get the Annual allowance.
Employer should be within de minimis state aid threshold
Now you should be thinking that now what is this de minimis state aid threshold. Firstly let’s understand what is de minimis state aid?
The definition of de minimis state aid is very broad and can include state grants, subsidies and other government funded financial incentives.
However, any paperwork you receive for such payments will state clearly that it is de minimis state aid and therefore must be counted for these purposes.
How much is the limit/Threshold?
Example:
Claim year – 2020 to 2021
Sector – agriculture
De minimis state aid 2018 to 2019 = €1,000
De minimis state aid 2019 to 2020 = €1,200
De minimis state aid 2020 to 2021 = €5,739 (this includes £4,000 of Employment Allowance converted into euros)
Total de minimis state aid = €7,939
This is under the €20,000 threshold for the agriculture sector.
In this example, the business is eligible to claim Employment Allowance because the amount of de minimis state aid they received is below the sector threshold.
Who cannot claim the EA ?
- If the company’s only employee is the sole director.
- Public bodies
- someone employs for personal, household or domestic work (like a nanny or gardener)
If you guys have any query feel free to ask us for support whether you are ACCA student or not. If you are ACCA student and want to enroll for any ACCA UK Taxation online lectures or mentoring, then also you can contact us.
Thank You.
By Dipan Ghataliya
(UK Tax Tutor & Director at Career Compass)