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Employment Allowance - National Insurance Contributions

 

From 6 April 2014 eligible employers can claim the Employment Allowance and reduce their employer Class 1 National Insurance contributions (NICs) by up to £2000 for each tax year.

 

Who Can Claim?

Employers can claim the Employment Allowance if they are a business or charity (including Community Amateur Sports Clubs) that pays employer Class 1 NICs on their employees’ or directors’ earnings.

If the company belongs to a group of companies or the charity is part of a charities structure, only one company or charity can claim the allowance. It is up to each employer to decide which company or charity will claim the allowance.

Employers can only claim the £2,000 Employment Allowance against one PAYE scheme - even if the business runs multiple schemes.

Not all businesses can claim the Employment Allowance

Who Can’t Claim?

  • Employers cannot claim the Employment Allowance, for example if they:
  • Employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker
  • Already claim the allowance through a connected company or charity
  • Are a public authority, this includes; local, district, town and parish councils
  • Carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example:
  1. NHS services
  2. General Practitioner services
  3. The managing of housing stock owned by or for a local council
  4. Providing a meals on wheels service for a local council
  5. Refuse collection for a local council
  6. Prison services
  7. Collecting debt for a government department
  • You do not carry out a function of a public nature, if you are:
  1. providing security and cleaning services for a public building, such as government or local council offices
  2. supplying IT services for a government department or local council
  3. Personal and Managed Service Companies who pay contract fees instead of a wage or salary, may not be able to claim the Employment Allowance, as you cannot claim the allowance for any deemed payments of employment income.
  4. Service companies can only claim the allowance, if they pay earnings and have an employer Class 1 NICs liability on these earnings.

   

For more guidance on excluded business types visit https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance

 

How do Employers claim the Employment Allowance?

Employers can use a payroll services provider such as Payroll Services Outsourced, their own payroll software or HM Revenue and Customs’ (HMRC’s) Basic PAYE Tools to claim the Employment Allowance.

When making a claim, they must reduce their employer Class 1 NICs payment by an amount of Employment Allowance equal to your employer Class 1 NICs due, but not more than £2,000 per year.

E.g., if your employer Class 1 NICs are £1200 each month, in April 2014 your Employment Allowance used will be £1200 and in May 2014 £800, as the maximum is capped at £2,000.

Once made, HMRC will automatically carry an employer’s claim forward each tax year. So at the beginning of each year the employer should check that their circumstances haven’t changed.

 

Exempt employers using HMRC paper returns

If an employer is exempt from RTI (Real Time Information) filing, or unable to file online, they can claim the Employment Allowance, at the beginning of the tax year, using the paper Employer Payment Summary (EPS).

 

More information will be included in guidance provided to all exempt employers. https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance

 

 

Do you need help claiming the NIC Employment Allowance?

Contact us today and outsource your payroll.

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