The rules for Employment Allowance are changing from 6 April 2020.
Employment Allowance was introduced from 6 April 2014 for the purpose of supporting businesses and charities in helping them to grow by cutting the cost of employment. By claiming the allowance certain smaller employers are entitled to a maximum £3,000 reduction in their annual Class 1 National Insurance bill.
From 6 April 2020, a number of administrative changes are being made to the allowance, and eligibility for claiming the allowance. However it is important to note that the allowance will now be regarded as de minimis State aid. This means it will be taken into account when considering the total State aid a Company is able to receive.
Importantly, in relation to the Venture Capital Tax Reliefs, the Seed Enterprise Investment Scheme (SEIS) operates under the de minimis State aid provisions. The maximum a Company can receive via SEIS is £150,000, but this is subject to all other de minimis State aid received in the 3 years up to an including the date of the investment. Therefore, if a Company is raising investment via SEIS and is eligible for Employment Allowance, it may not be able to raise the full £150,000 under the SEIS. Companies should therefore be mindful of the timing of receiving the Allowance and the overall de minimis limits.
During the Brexit transition period which is in place until the end of 2020, and until the UK has successfully negotiated a ‘deal’ with the EU, the UK is required to operate in accordance with EU State aid rules.
For more information on Employment Allowance, de minimis State aid and the changes, please see here
