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Home | News & events | Legal updates | National Insurance holiday for new businesses
National Insurance holiday for new businesses
03 September 2010
Draft legislation giving new businesses a National Insurance holiday has recently been published.
The main points to note are:
- It will last from the date of the Emergency Budget on 22 June 2010 until 5 September 2013. The Holiday will target help on certain ‘new businesses’ who are also employers and who start up outside Greater London, the South East and the Eastern regions of the UK
- New businesses will be able to make National Insurance Contributions (NICs) savings under the Holiday from earnings paid to employees on or after 6 September 2010. The holiday will operate by allowing a deduction against the amount of Class 1 NICs that an employer is required to pay to HMRC each month or each quarter.
- For the first ten qualifying employees that a new business employs in its first year of business, following start up, it will be entitled to an individual Holiday for each of those employees. The Holiday period for each employee will last for the shorter of the employee’s first year of employment or the time left until the holiday scheme ends on 5 September 2013.
- The holiday will apply to all relevant earnings paid to a qualifying employee during the first year of the employee’s employment but there will be a maximum saving of £5,000 in employer NICs in respect of each employee.
- Once a business has employed its first ten employees, it cannot qualify for a holiday for any other employees taken on.
- The draft legislation includes detailed anti-avoidance measures to prevent existing businesses making arrangements to exploit the holiday. In particular, a business will not qualify as a new business if the person applying for the holiday has at any time in the six months previously carried on much the same business or the activities have been transferred from one person to another.
- Individuals supplied by personal service companies or managed service companies do not qualify under the legislation.
- The holiday has no National Insurance implications for employees.
- It will apply equally to workers sent to the UK from another EC member state.
Although the draft legislation will not become law until early 2011, businesses will be able to benefit from the holiday from 6 September 2010. A point to note is that if draft legislation is not passed in substantially its draft form, a business which participates in the scheme will have to pay over any contributions which it has withheld from 19 April 2011.
In order to take advantage of the holiday a business has to notify HMRC by completing a form. This can be done online.
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Niall Murphy
Partner
T: 03700 86 6778
I: +44 (0)1489 61 6778
E: niall.murphy@shoosmiths.co.uk