National insurance holidays for new businesses
HMRC have published a technical note which provides more details about the new national insurance contributions (NIC) relief for qualifying businesses outside London, the South East and East England which was announced as part of the coalition Government’s first Budget on 22 June 2010.
The plan is referred to by HMRC as the ‘Regional Employer National Insurance contributions Holiday for New Businesses’ which has been helpfully shortened to ‘holiday’. The scheme is designed to help new businesses in qualifying regional areas to create jobs, by reducing the costs of employing staff.
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 will run from the date of the announcement on 22 June 2010 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 draft 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 early 2011 so should the legislation never be enacted any relief already obtained will be repayable.
HMRC have confirmed that further guidance, including an application form, is to be published shortly. The scheme is expected to start operating fully from 6 September 2010.