Since 2014, any eligible employers within the UK have been able to reduce Class 1 NIC’s by claiming employment allowance for their company. Employment Allowance is claimed as part of a businesses HMRC payroll submissions. If claimed, employers are not required to pay the first £4,000 of employer’s national insurance – a great opportunity for significant financial savings that could benefit many startups within the UK’s tech industry!
Are startup businesses within the tech industry eligible for employment allowance?
Let’s start with the good news; if you have never claimed Employment Allowance for your start up business before, you can retrospectively apply for the past 4 tax years – dating all the way back to the 2016/17 tax year!
For these prior years, Employment Allowance was at £3,000 per year, although your startup business could be entitled to as much as a £12,000 refund from HMRC (coupled with this year’s tax relief). While most startups businesses within the UK should be eligible for Employment Allowance, however, there are some notable exemptions which business owners need to be aware about before applying:
Is my tech startup ineligible for Employment Allowance?
1. Class 1 liability over £100,000
If you are a business owner with a secondary employer’s Class 1 NIC liability of £100,00 or more during the prior tax year, you will not be able to claim Employment Allowance for your tech startup. To check this, liability should be calculated by considering all connected parties. If the total number of employers add up to either £100,000 or over, no one within this category will be eligible for Employment Allowance.
2. State aid
As of 6th April 2020, Employment Allowance has been operated as “de minimis State aid”. This means any employers that already claim de minimis state aid should check whether they have sufficient balance available in order to make an Employment Allowance claim for their tech startup. If you already receive de minimis state aid, this is something you should have been made aware of previously. Should you believe that you already claim de minimis state aid but were not notified, this needs to be raised with your scheme’s administrator.
Furthermore, any startup business within the UK’s tech industry that receives more than the sectors ceiling or if claiming Employment Allowance would result in your business breaching this ceiling, eligibility will not be granted. If you require clarity of what the ceiling is for any particular UK industry, consult the HMRC website.
Single company directors
If any startup has just one employee that is paid over the Secondary Threshold for Class 1 National Insurance contributions and if they also happen to the company director, then you will not qualify for Employment Allowance. Similarly, any tech startup that is made up of a single employee would also not be eligible for claiming Employment Allowance.
How to claim Employment Allowance for startup businesses?
The best way to apply employment allowance for your business is to entrust this task to a professional accountancy firm. Based in Central London, Venn Accounts are chartered accountants who specialise in providing personalised accountancy services for startups, as well as small businesses.
With an emphasis on going the extra mile for clients, Venn Accounts provide an all-encompassing service that is tailor-made for the needs of startup business owners.