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HMRC News: Membership Tax Relief, NI Liability for Employers & EA Changes

19/11/2019

Membership Subscription Tax Relief

If you are a director or employee and you pay a subscription to be a member of an organisation check to see if you can obtain Income Tax relief for the cost of the subscription as HMRC have updated their list of ‘approved organisations’.

Remember to qualify you must be working in a job that is relevant to the organisation to which you pay the membership subscription.

Employers Liable for National Insurance (NI) on Termination of Employment Payments

As of the 6th of April 2020 employers will be required to pay Class 1A NI (currently 13.8%) on the amount of the termination of employment payments to their employee that exceeds £30,000. The employee position is to remain as is it now, i.e. the employee is to continue to pay no NI on the received termination payment amount.

Employment Allowance (EA) Changes Employers Must Not Ignore

As of the 6th April 2014, the Government has provided EA to reduce the employer’s annual secondary Class 1 NI-from 6 April 2016 the EA is capped at £3,000 per tax year but the EA is not available to one director company.

A ‘heads up’ – we have draft legislation for proposed changes to the EA as from 6th April 2020. The consultation period on the draft legislation is now closed, and it is expected that there will be little change to the draft EA legislation.

Based on the draft legislation the proposed main EA changes to come in from the 6th April 2020 are:

1. the employer’s secondary Class 1 NI for the previous tax year must be £100,000 or less.
2. the employer will not automatically obtain EA. The employer must make an EA claim to HMRC for each tax year. The claim will include confirmation by the employer that all the EA eligibility conditions have been met by the claimant employer. At present, the EA continues until the employer says it should stop.
3. If the employer shares business resources, e.g. premises or employees, then the relevant employers may be treated as ‘connected’ and the connected employers will need to review their entitlement to EA as connected employers.
4. EA is to be classed as state aid and so if you are an employer already claiming state aid then the EA counts towards the maximum state aid currently Euro 200k- you may think that a ‘No Deal Brexit’ will make this an obsolete condition but it is intended that the proposed state aid conditions will remain post Brexit ‘deal or no deal’ as the EU state aid schemes are a rolling 3 years agreement!

Discussions with software providers are currently taking place to accommodate the proposed EA changes including the state aid notification requirements which include not only the EA amount but also the total state aid amount and the state aid sector in which the employer operates-there is no central register of state aid, and currently, payroll agents are unlikely to have the state aid information; the state aid information is to be reported in euro. Apparently, the proposed EA changes are proving to be a challenge for the software developers!

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If you would like to discuss any of the HMRC news mentioned in this article – or any other tax topics, please don’t hesitate to contact us.