To close instances of abuse of the employment allowance (EA), HMRC has started a technical consultation on the exclusion of certain companies from the allowance, which it says will close a tax loophole and ensure the relief is focused on companies which are creating jobs
At the Summer Budget 2015, the Chancellor announced that from April 2016, employment allowance would no longer be available to companies where the director is the sole employee. The current consultation seeks comments on the draft regulation to implement the new exclusion.
First introduced in April 2014, the employment allowance gives businesses, charities, and community amateur sports clubs (CASCs) a reduction of up to £2,000 per year on their employer national insurance contributions (NICs) bill. From April 2016, the allowance will be increased by £1,000 to £3,000.
HMRC says the employment allowance currently has very broad eligibility and wants to implement the proposed change in order to focus the allowance on those firms who are creating employment. Early estimates suggest that this measure will affect around 150,000 limited companies with a single director.
The consultation closes on 31 Jan 2016 and details are here
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