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National Insurance Holiday

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Regional Employers' National Insurance Contribution Holiday

Under this scheme, for a limited period and subject to meeting certain conditions, new businesses may qualify for a deduction of up to £5,000 from the employer NICs that would normally be due - for each of the first ten employees they take on. This is a potential saving of £50,000 year year!

The NICs you are entitled to withhold under the scheme do not have to be repaid at a later date.

Time limits - when the NICs holiday starts and ends

The NICs holiday is available to new businesses that start up during the period from 22 June 2010 to 5 September 2013.

However, as the scheme itself didn't start until 6 September 2010, you can only deduct employer NICs due on earnings paid on or after that date (but before 5 September 2013).

Business location - why it's important

You can only apply for the NICs holiday if your principal place of business is located within designated areas of the UK at the time your business starts up. The included countries and regions are:

  • Northern Ireland
  • Scotland
  • Wales
  • East Midlands
  • North East
  • North West
  • South West
  • West Midlands
  • Yorkshire and Humber

In most cases, there should be little doubt about whether your business started up in a qualifying region, but in some instances your principal place of business may not be clear. If you cannot show that your business carries out most of its activities within one of the included regions when it starts up, then you will not qualify for the NICs holiday.

Types of business that can apply

The types of business that may be able to apply for the holiday are:

  • a sole trader, company or partnership that begins to carry on a trade, profession or vocation
  • a property business or investment business
  • a new trading charity whether or not it is carrying out activities with a view to profit

Managed Service Companies do not qualify for the holiday.

Where an employer within the intermediaries legislation, commonly referred to as IR35, meets the holiday qualifying criteria, they will be eligible for the holiday on the salary or wage payments they make. They will not be eligible for the holiday on income deemed to be earnings or employment resulting from the IR35 rules.

Businesses not considered to be new

In most cases, it should be very clear that your new business is genuinely new. However if your business has, for example, recently changed ownership or was formerly part of another established business, then you'll need to confirm that it doesn't fall into one of the excluded categories before going on to apply for the holiday.

Business start date - why it's important

If your business is eligible, the National Insurance contributions (NICs) holiday will run for 12 months after the date your business started.During this time, the first ten employees you hire are potentially 'qualifying employees' for the purposes of this scheme. This 12 month period is limited by the previously mentioned end date for this scheme, so employer NICs due on earnings paid after 5 September 2013 cannot be withheld, no matter when your business started.

For the purposes of the NICs holiday, the date your business started will be treated as being the earlier of:

  • the date your business started to trade
  • the date when you first hired an employee

If, exceptionally, your business started to trade on or after 22 June 2010 but you first hired an employee before 22 June 2010, your business will be treated as having started on 22 June 2010. Remember, if your business started to trade before 22 June 2010, it is not eligible for the NICs holiday.

Claiming a refund of employer NICs already paid to HMRC

If you have already made payments of employer NICs that you realise could have been withheld under this scheme, you first need to complete an application form to confirm your eligibility to take advantage of the NICs holiday.

To claim a refund during the year

If you have not reduced the monthly/quarterly payments you have already made by the amount of NICs holiday due, you can simply reduce future monthly/quarterly payments to HMRC by that amount.

If you are not able to do this because the total amount you are due to pay to HMRC is less than the holiday deduction you are eligible to claim, you can write to your HMRC Accounts Office to apply for a refund.

Your application should contain the following information:

  • your business name, address and telephone number
  • confirmation that your holiday application has been approved by HMRC
  • the amount of employer NICs you could have deducted
  • confirmation that it will not be possible to deduct this amount paid over from future payments for that tax year
  • your HMRC Accounts Office reference (this is shown on the front cover of your payslip booklet or P30B letter)
  • the number of employees your refund application relates to

Claiming a refund after the end of the tax year

If you have overpaid employers NICs at the end of the tax year, HMRC will refund any amounts due after receiving your Employer Annual Return (form P35 and form P14s) and your Employer NICs Holiday End of Year Return.

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