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RSM UK's Zoe Martin looks at PAYE changes to be implemented in the coming 2020 tax year, in relation to the Employment Allowance.

Restriction

A new restriction on the Employment allowance will be introduced from 6 April 2020. Going forwards, employers will only be eligible for the Employment Allowance if their total Secondary Class 1 NIC liability in the previous tax year was lower than £100,000.

Another result of restricting the Employment Allowance is that, from April 2020, the Employment Allowance will be classed as ‘de minimis state aid’. The EU state aid rules are designed to prevent member states from measures which may otherwise distort competition within the single market.

There is a ceiling on how much state aid any organisation can receive under the de minimis rules. For most businesses, this ceiling will be €200,000 over a rolling three-year period, however different levels apply for the agriculture, fisheries and road transport sectors.

Employers must have a sufficient balance remaining within their relevant de minimis state aid threshold for the full amount of the £3,000 Allowance in order to make a claim. The impact of this is that if an employer is already in receipt of other state aid payments, they may lose their entitlement to the Allowance.

Other Administrative Changes

A number of administrative changes are being introduced at the same time as the restriction which employers will need to consider. From April 2020, the Allowance must be claimed every year, and will no longer be automatically rolled forwards from one year to the next, as it has been to date. This could make the process more onerous.

Employers will be required to supply detailed information each year to support their claim and to make a formal declaration to confirm their entitlement to the Allowance. This appears onerous but, as the state aid rules are EU legislation, some of these issues may be resolved before April 2020.