Employment allowance

2Exceptions

Public authorities

1

A person cannot qualify for an employment allowance for a tax year if, at any time in the tax year, the person is a public authority which is not a charity.

2

In subsection (1)—

  • “charity” has the same meaning as in the Small Charitable Donations Act 2012 (see section 18(1) of that Act), and

  • “public authority” includes any person whose activities involve, wholly or mainly, the performance of functions (whether or not in the United Kingdom) which are of a public nature.

Personal, family or household affairs

3

Liabilities to pay secondary Class 1 contributions incurred by a person (“P”) are “excluded liabilities” if they are incurred in respect of an employed earner who is employed (wholly or partly) for purposes connected with P's personal, family or household affairs.

F13A

But the liabilities mentioned in subsection (3) are not “excluded liabilities” by virtue of that subsection if all the duties of the employed earner’s employment which relate to P’s personal, family or household affairs are performed for an individual who needs those duties to be performed because of the individual’s—

a

old age,

b

mental or physical disability,

c

past or present dependence on alcohol or drugs,

d

past or present illness, or

e

past or present mental disorder.

4Workers supplied by service companies etc

Liabilities to pay secondary Class 1 contributions are “excluded liabilities” if they are incurred by virtue of regulations made under section 4A of SSCBA 1992 or SSCB(NI)A 1992 (earnings of workers supplied by service companies etc).

4AF2Excluded companies

A body corporate (“C”) cannot qualify for an employment allowance for a tax year if—

a

all the payments of earnings in relation to which C is the secondary contributor in that year are paid to, or for the benefit of, the same employed earner, and

b

when each of those payments is made, that employed earner is a director of C.

F3Excluded persons: secondary Class 1 liability limit of £100,000 or more

4B

A person cannot qualify for an employment allowance for a tax year if the total of the following items is £100,000 or more—

a

the person’s qualifying liabilities for the previous tax year, and

b

where the person is a company, the qualifying liabilities for that previous tax year of each company (if any) to which the person is connected at any time in that previous tax year, and

c

where the person is a charity, the qualifying liabilities for that previous tax year of each charity (if any) to which the person is connected at any time in that previous tax year.

4C

A person who is a company or a charity cannot qualify for an employment allowance for a tax year if there is a time in the tax year when the relevant total is £100,000 or more; and for this purpose “the relevant total” at any particular time in the tax year is the total of the qualifying liabilities for the previous tax year of each other company or charity (as the case may be) to which the person is connected at the particular time.

4D

For the purposes of subsections (4B) and (4C)—

a

a company is “connected” with another company if they are connected with one another for the purposes of section 3(1);

b

a charity is “connected” with another charity if they are connected with one another for the purposes of section 3(2).

4E

In subsections (4B) to (4D) and this subsection—

a

“charity” has the same meaning as in the Small Charitable Donations Act 2012 and includes a company which is treated as a charity by paragraph 8(5) of Schedule 1;

b

“company” has the meaning given by section 1121(1) of the Corporation Tax Act 2010 (meaning of “company”) and includes a limited liability partnership;

c

“qualifying liabilities” means any liabilities to pay secondary Class 1 contributions under SSCBA 1992 or SSCB(NI)A 1992 excluding any liabilities which are excluded liabilities by virtue of subsection (4).

Excluded persons: receipt of de minimis state aid

4F

A person cannot qualify for an employment allowance for a tax year if, were the person to receive the maximum employment allowance available for that tax year, it would in the person’s case be state aid that is not de minimis state aid.

4G

For the purpose of subsection (4F)—

  • “de minimis state aid” means state aid which is exempted from notification under Article 108(3) of the Treaty on the Functioning of the European Union by–

    1. a

      Commission Regulation (EU) No 1407/2013 (de minimis aid except in the agriculture and fisheries sectors),

    2. b

      Commission Regulation (EU) No 1408/2013 (de minimis aid in the agriculture sector),

    3. c

      Commission Regulation (EU) No 717/2014 (de minimis aid in the fisheries sector), or

    4. d

      Commission Regulation (EU) No 360/2012 (de minimis aid to undertakings providing a service of general economic interest);

  • “the maximum employment allowance”, in relation to a tax year, means the amount in section 1(2)(a) converted into euros using the exchange rate quoted by the European Central Bank for the second to last day of March in the previous tax year or, if no rate is quoted for that date, the rate quoted for the closest day to that date for which a rate is quoted.

Transfers of businesses

5

Subsection (6) applies if a business, or a part of a business, is transferred to a person (“P”) in a tax year.

6

Liabilities to pay secondary Class 1 contributions incurred by P in the tax year are “excluded liabilities” if they are incurred in respect of an employed earner who is employed (wholly or partly) for purposes connected with the transferred business or part.

7

For the purposes of subsection (5) a business, or a part of a business, is transferred to P in a tax year if, in the tax year—

a

another person (“Q”) is carrying on the business or part, and

b

in consequence of arrangements involving P and Q, P begins to carry on the business or part on or following Q ceasing to do so.

8

In subsection (7)(b) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

9

In subsections (5) to (7) “business” includes—

a

anything which is a trade, profession or vocation for the purposes of the Income Tax Acts or the Corporation Tax Acts;

b

a property business (as defined in section 263(6) of the Income Tax (Trading and Other Income) Act 2005);

c

any charitable or not-for-profit undertaking or any similar undertaking;

d

functions of a public nature.

Anti-avoidance

10

A person cannot qualify for an employment allowance for a tax year if, apart from this subsection, the person would qualify in consequence of avoidance arrangements.

11

In a case not covered by subsection (10), liabilities to pay secondary Class 1 contributions incurred by a person (“P”) in a tax year are “excluded liabilities” if they are incurred by P, or are incurred by P in that tax year (as opposed to another tax year), in consequence of avoidance arrangements.

12

In subsections (10) and (11) “avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to secure that a person benefits, or benefits further, from the application of the employment allowance provisions.

13

In subsection (12) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).