Section 4: “Holiday” for new businesses
28.This section introduces Part 2 of the Act, which provides for the regional secondary contributions holiday for new businesses.
29.Subsection (1) sets three conditions, all of which must be met if the section is to apply.
30.The first condition, in subsection (1)(a), provides that a person, or a number of persons in partnership, (“P”) must have started a new business during the relevant period. Section 5 defines what is meant by “starting a new business”.
31.Subsection (4) defines “the relevant period”. It begins on 22 June 2010, when the Chancellor announced the Holiday in the Emergency Budget. It ends on 5 September 2013, three years after the implementation date.
32.The second condition, in subsection (1)(b), provides that the principal place at which the new business is carried on at the time it starts must not be in any of the excluded regions.
33.Subsection (5) provides that “the excluded regions” for the purposes of the Holiday are Greater London, the South East Region and the Eastern Region. Section 11 defines “the South East Region” and “the Eastern Region”.
34.The third condition, in subsection (1)(c), provides that P’s new business will not qualify for the holiday unless there are “qualifying employees” in relation to it. Section 6 specifies when a person is a qualifying employee.
35.Subsection (2) sets out how the benefit of the Holiday will be provided. It gives two alternative means by which P can benefit.
36.First, subsection (2)(a) provides that P may deduct the appropriate amount in respect of each qualifying employee from Class 1 contributions payments that P is liable to make. “Class 1 contributions payments” is defined in section 11 and section 7 specifies what is the “appropriate amount”.
37.Secondly, subsection (2)(b) provides that if P is not able to deduct this amount, it may be refunded to P. Section 8 explains how a deduction or refund is made.
Example
Brandon starts a new business on 27 September 2010 and takes on two employees on 1 November 2010. Brandon is eligible for the Holiday but does not claim. After the end of the 2010/11 tax year he is advised by his accountant that he could have claimed the Holiday. Brandon decides to claim and calculates what his NICs Holiday entitlement was for the period from 1 November 2010 to 5 April 2011 and makes an application for a refund to HMRC. Provided the information is complete, Brandon would be entitled to a refund of the secondary Class 1 contributions payable in respect of the two employees for the 2010/11 tax year. He will continue to enjoy the Holiday for his two employees up to 31 October 2011 by making deductions from the payments he is due to make to HMRC during the 2011/12 tax year.
