The new government have introduced a number of measures designed to help the economy along, one of which was the Employer’s National Insurance (NI) holiday. But what is it and how can you get it?
In a nutshell, new businesses taking on staff can claim exemption from paying Employer’s NI. The businesses have to be started between 22 June 2010 and 5 September 2013.
Who Can Apply?
To be eligible, the new start-up has to be outside the regions of London and South East England. For multi-site operations, the determining factor is where the principal place of business is located.
Any trading, property or investment business can apply. Managed service companies (ie coming under IR35) are ineligible.
To be classed as ‘new’, the business’s operations have to have begun after 22 June 2010. So a limited company can be formed before that date, for example, and still be eligible.
How Long Does It Last?
The holiday lasts for a period of 12 months after the business starts, and there’s special rules to prevent abuse of the system (such as transferring an old business into a new company).
You can get a refund of contributions if you apply after taking on staff.
You can claim a maximum of £5,000 per employee, up to 10 employees. The 2010/11 rate of Employer’s NI is 12.8%, going up to 13.8% in 2011/12.
The application has to be made to be made by the proprietor, a partner or a company director. Agents (such as your accountant) cannot make the application.
How To Apply
1. Register as an employer with HM Revenue & Customs (HMRC), either online at http://www.hmrc.gov.uk/employers/ or by phoning 0845 60 70 143.
2. Once you have confirmation of your Employer’s References, most business can do it online at www.businesslink.gov.uk/nicsholiday . However you will need to apply on paper if your principal place of business is outside of the UK or if the business has already had some form of state aid (such as a government grant). The form is available from HMRC.
3. If eligible, you will then receive confirmation by email, which must be kept for three years.
What’s it Worth?
A saving of £5,000 per employee sounds fantastic but what does it mean in reality?
With a rate of 12.8% for 2010/11, to make a saving of £5,000 per employee it would mean paying them nearly £45,000.
But to put it another way, a new employee earning £20,000 a year would normally cost the company about £1,800 in NI contributions, which is definitely worth claiming.
With that kind of saving, company bosses could take a holiday of their own. Thanks Mr Osborne!