National insurance holidays for new businesses
The National Insurance Contributions Bill was presented to Parliament on 14 October 2010. One of the measures covered by the bill concerns the regional secondary Class 1 contributions holiday for new businesses. The scheme is intended to help new businesses in qualifying regional areas to create jobs, by reducing the costs of employing staff. The scheme is only open to qualifying new businesses outside London and the South East.
The scheme will operate by allowing a deduction against the amount of Class 1 NICs that a qualifying employer is required to pay to HMRC each month or each quarter. The scheme which was officially introduced on 6 September 2010 will run from the original date of the announcement on 22 June 2010 (as part of the coalition Government’s first Budget measures) until 5 September 2013.
The Holiday will apply to all relevant earnings paid to a qualifying employee during the first year of an employee’s employment or for the time left until the Holiday scheme ends on 5 September 2013. A qualifying business will be entitled to an exemption for up to a maximum of £5,000 of Class 1 employer NIC for each of the first ten qualifying employees.
The legislation includes anti-avoidance measures to prevent existing businesses making arrangements to exploit the Holiday. The legislation is not expected to receive Royal Assent until 2011. In the unlikely event that the legislation is not enacted any relief already obtained will be repayable.