New employment allowance scheme will help farmers

A NEW scheme to help fund the cost of employing staff, which should be extremely useful to rural businesses, was introduced on April 6.

In the National Insurance Contributions Bill there is a new allowance of £2,000 which can be claimed by almost all employers, with just a few exclusions.

This means, for example, that a business can pay its first employee a salary of up to £22,400 per annum without having to pay any employer’s National Insurance Contributions (NICs).

Mike Harrison, partner in chartered accountant Saffery Champness, said: “This new scheme will be extremely useful to rural businesses with a small number of employees since, if an employer’s NIC liability for the year is less than the £2,000 allowance, it will at a stroke reduce the contribution they have to pay to zero.

“It is not, however, available to create a refund if not used, or a loss to carry forward.

“Likewise an employer in more than one PAYE scheme will only be able to apply the allowance to one scheme as it is awarded per employer and not per scheme.”

In order to gain the benefit employers need to ensure they have ticked the box on their payroll software.

Neither is it necessary for them to have been operating the PAYE scheme for a whole tax year and new employers for the 2014/15 tax year should also be able to benefit from it.

There are some exclusions, including domestic staff, so it cannot be offset against the NICs of an employee whose job is connected with their employer’s personal, family, or household affairs.

Mr Harrison said: “Another measure included for antiavoidance purposes is that connected entities will each be unable to take advantage of the scheme and such structures must decide which one will qualify for the allowance.

“This is to ensure employers do not set up a number of different entities, all with different PAYE schemes.

“This is a small, yet significant, concession to business which we consider will help in getting more people into work and in crossing that line where a first or additional employee actually becomes viable.

“In the rural sector it should be an incentive to business to secure additional employment, or to safeguard existing jobs.”

From April next year, employers’ NICs on under 21- year-olds will also be abolished.

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