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Changes to the Employment Allowance

It was announced as part of the Autumn Budget 2018 measures that access to the Employment Allowance was to be restricted. From 6 April 2020, the £3,000 NIC Employment Allowance will only be available to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers will have their contributions aggregated for this purpose.

The draft legislation necessary to put this change in place has recently been published and is open for comment until 20 August 2019. The accompanying draft statutory note sets out the information requirements for employers claiming the Employment Allowance from April 2020. A final version of the regulations and guidance is expected to be published in October 2019.

There are currently a number of excluded categories where employers cannot claim the employment allowance. This includes:

  • Limited companies with a single director and no other employees;
  • Persons employed for personal, household or domestic work, such as a nanny or au pair (unless they are a care or support worker);
  • You are a public body or business doing more than half your work in the public sector;
  • You are a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary.

Loss buying restrictions

Under qualifying circumstances, Corporation Tax (CT) relief is available where your company makes a trading loss. The trading loss can be used by offsetting the loss against other gains or profits of your business in the same or previous accounting period. The loss can also be set against future qualifying trading income.

However, there are restrictions on ‘loss-buying’. This describes the situation where a person buys a trading company wholly or partly for its unused trading losses rather than solely for the inherent value of its trade or assets. The new owner usually introduces new activity into the company to try to keep its entitlement to relief for losses.

The legislation governing this area can result in all the company’s unused carried- forward trading losses being cancelled where either:

  • within any specified period, there is both; a change in the ownership of a company, and a major change in the nature or conduct of a trade carried on by the company,

or

  • there is a change in ownership of a company at a time when the scale of its trading activities has become small or negligible.

For accounting periods beginning on or after 1 April 2017, the specified period is 5 years beginning no more than 3 years before the change in ownership occurs.