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National Insurance Employment Allowance

What is it and might your farming business be eligible?

No matter what sector of farming you’re involved in, we’re sure you constantly have your eye on the costs that your business faces year in and year out. Battling to beat tough economic conditions, staying ahead of your competitors and keeping a cap on costs can sometimes seem like an uphill struggle. But every now and then, there is good news that seems to come from nowhere and the National Insurance Employment Allowance is one such piece of welcome news.

Employer’s National Insurance Contributions (NICs) are recognised both as a sizeable cost for many businesses and in some instances a reason for small businesses in particular to resist employing people. So, it’s against this backdrop that George Osborne set out to significantly reduce Employer’s NICs in the 2013 budget.

The National Insurance Employment Allowance allows qualifying businesses to save up to £2,000 every year on their employer/secondary Class 1 NICs. This change will see a significant number of UK businesses qualifying for meaningful reductions in the cost of employing people and may even be the motivating factor that’s needed to get employers increasing the size of their payroll again.

Might your farming business be eligible?

In simple terms, any business that pays Class 1 NICs for employees or directors is eligible to make the saving. If you run multiple PAYE schemes or are part of a group of companies, on the other hand, only one scheme or member of the group can benefit. Because of this, it is important to establish which scheme or which business you will select to enjoy the reduction.

What do you need to do?

Claiming your National Insurance Employment Allowance is extremely simple and is a straightforward case of making a reduction in how much you are due to pay. For example, if your total Employer Class 1 NIC in April 2014 is £4,000, you simply reduce your amount due by £2,000, making your actual payment only £2,000. If however, you have smaller monthly payments due, you need simply make no payments until the time that your £2,000 reduction has been used up and then re-start payments to cover any remaining amounts.

If you happen to pay less than £2,000 in contributions during the year and only have one scheme, any unused allowance is lost. In the event of having more than one scheme, where your payments are up to date and you have scope to claim the allowance you can apply to HMRC to refund any remaining unused allowance at the end of the tax year.

In most cases, your payroll software will automatically take into account these changes, but it is well worth checking with your provider in order to make sure you don’t miss out. The most important action is registering for the first time. Once this is done, HMRC will automatically roll your claim forward each year. That said, if your situation changes year to year, it’s down to you to let HMRC know.

If you’d like to find out more about the NI employment allowance and what it means to your farming business then give us a call on 01763 247321.

Posted in: HMRC, NICs, Rural business

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