Employer National Insurance Contributions Holiday
Since June 2010 new businesses have been able to apply to HMRC for the Employers National Insurance Contributions (NIC) Holiday scheme. Under the scheme new businesses, subject to meeting certain criteria, are able to reduce their Employer National Insurance (NI) contributions for a period of up to 12 months by up to £5000 for each of their first 10 employees, potentially saving up to £50,000 in their first year.
But is it really that simple? In January 2012 the Treasury revealed that only 10,000 new businesses had taken up the scheme; however the government had forecast that 400,000 businesses would be taking advantage of the NIC break.
David Cameron shared his disappointment at the low up take on the Employers NIC holiday and admitted that it had not been as successful as hoped. Speaking during a question time at Intuit in Maidenhead David Cameron stated:
“The scheme has not worked as well as we hoped. It was too complicated and too targeted at specific businesses. It resulted in around 1,000 jobs but that was not enough”
Certainly the qualifying criterion does seem to be complicated, which could be one of the reasons for new businesses not taking up the offer.
Business location must be in
Yorkshire and Humber
Types of business
A sole trader, company or partnership that begins to carry on a trade, profession or vocation
A property business or investment business
A new trading charity whether or not it is carrying out activities with a view to profit
The NIC holiday may only be claimed by businesses that start up during the period from 22nd June 2010 to 5th September 2013.
So once you have determined that yes your business does fall in to the qualifying location and, yes your type of business also qualifies and yes you are within the time limit, what else do you need to consider?
Complications to consider
It may not be obvious where the place of business is located. For example you may have multiple locations. HMRC state
“Your principal place of business will be the one where you carry out the greater part of your business. If your business is split equally between locations – one which qualifies and another which doesn’t – the location you use as your administration centre/head office will be considered to be your principal place of business.
If your business does not have an obvious principal location, is internet based or involves driving from one job to the next, the place where you keep your equipment, retain your business records or carry out administrative parts of your business may be considered. The onus will be on you to demonstrate, if asked, that your principal place of business is within an included region.”
Some businesses may not be considered ‘new’. For example your business may not be considered new if the following applies:
at any time in the six months leading up to the start of this business, you carried on another business and the new business consists (or mostly consists) of activities that were undertaken in the other business
you begin to carry on a business as a result of a transfer of another business and the activities of the new business (or most of them) were previously carried on in the other business
you begin to carry on a business and before the business starts you enter into an arrangement to take on an existing business or part of an existing business at some point during the period of the NICs holiday
In addition there are other more obscure ‘new business’ criteria to consider which can be found on the HMRC website.
All employees are counted towards the limit of ten employees regardless of the following:
Do not earn enough to trigger NI deductions
Are over pension age
Are part time or casual staff
Have more than one job
Are family members
So it would seem that if your first ten qualifying employees do not earn enough or are over pension age and do not trigger NI deductions, you will not be able to carry over the NIC holiday to your next ten employees who may trigger NIC deductions.
Why hasn’t it worked?
Although it has been stated that it is not clear why the new businesses have not taken up the Employer NIC holiday scheme, one of the reasons cited for the failure is that the scheme is not automatic. It has to be claimed by the employer and many new businesses are not aware of it. And with so many varying and rather complicated qualifying criteria will a new business owner have the time to go through the application process, proving their location and new business status? Or has the daunting jumping through hoops process put employers off?
However if you think that you may be able to benefit then do apply and potentially save up to £50,000 in 12 months, please see below a link to HMRC’s Employers NIC Holiday page where you will find more details and how to apply.