What is the purpose of this consultation document?
The NIC Employment Allowance allows contractors to reduce their employers’ NIC by £2,000 each tax year and was a welcome introduction in 2014/15. However, this was to be short lived when, in the Summer Budget, it was announced that this was to be taken away from PSC’s as from 6th April 2016. To add insult to injury, it was also announced that the allowance would be increased by £1,000 to £3,000 at the same time.
The rationale for excluding limited companies where the director is the sole employee was that the allowance was to be focused on those businesses that support employment. It is estimated that around 150,000 single director limited companies will be affected by this measure.
Last week HMRC published a ‘Technical consultation on the exclusion of certain companies from the NIC Employment Allowance’. The consultation will run up until 3rd January 2016 and its purpose is to seek comments on the draft Social Security regulations to implement the excluded companies by asking two questions:
- Do the regulations as drafted achieve their objectives?
- Do these draft regulations produce any unintended consequences?
Answers:
- Yes, obviously!
- Yes, PSC’s take another hammering when they should be supported given that they make a telling contribution to the economy of this country.
The document says that the technical consultation will be of interest to contractors working through a limited company but one has to ask why, when it appears that this measure is a fait accompli.
My PSC employs both myself and my wife. Is the EA still applicable?
It’s well known that contractors don’t incur a £2k Employers NI liability, as they would also have to pay PAYE & E’ees NI at that level of salary.
Some contractors paid themselves at c£10k to increase their take home by £165.
In short – really not a big deal (IMO!)
[quote name=”Mark”]My PSC employs both myself and my wife. Is the EA still applicable?[/quote]
Currently, although suspect that will change in the near future.