National Insurance Holiday for new business

Posted on Analysis Nov 2010 - by Tandoori Magazine

Businesses always have new rules and regulations to look out for. Justin Randall looks at what's in store at the moment

The government has launched its National Insurance contribution holiday starting on 6 September 2010.

Under the three year scheme eligible new businesses will not have to pay the first £5,000 of Class 1 Employer NICs for each of the first 10 employees hired in the first 12 months of business, saving up to £50,000.

The scheme is open to new businesses set up on or after 22 June 2010 and will run until 5 September 2013.

Once the £5,000 cap is reached the holiday will end for that employee and Class 1 NIC will apply as normal. Any unused relief, i.e. if the employee leaves, is not transferable. The relief applies only to Class 1 contributions - not to Class 1A or Class 1B.

Relief is not compulsory and businesses will need to apply for the holiday. If you have not applied and been accepted, you will be required to pay as normal. Business can apply at http://www.businesslink.gov.uk/nicsholiday.

Before starting to complete the online application form, you should make sure that you have the following information:
-Your PAYE and Accounts Office references - you will find these in the New Employer Pack sent to you when you registered as an employer with HM Revenue & Customs
-Your business name
-The date your business started
-Your business address and post code
-The region or country your principal business address falls within.

The regions which will benefit will include Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.

However, businesses in the following regions are excluded:
- Greater London
- South East Region (Buckinghamshire, East Sussex, Hampshire, the Isle of Wight, Kent, Oxfordshire, Surrey, West Sussex, Bracknell Forest, Brighton and Hove, Medway, Milton Keynes, Portsmouth, Reading, Slough, Southampton, West Berkshire, Windsor and Maidenhead and Wokingham)
- Eastern Region (Bedford, Cambridgeshire, Central Bedfordshire, Essex, Hertfordshire, Norfolk, Suffolk, Luton, Peterborough, Southend-on-Sea and Thurrock).

If you are unsure whether your business falls within a qualifying region, you can check at http://www.gos.gov.uk/regionFinder.

Other key points:
Most staff will be included but there will be some specific exclusions, for example employees operating under companies caught by the IR35 rules. Restrictions also apply to subsidiary business, businesses in association and managed service companies.

In most cases, it should be very clear that your new business is genuinely new. However if your business has 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 applying for the holiday.

The legislation is not expected to receive Royal Assent until early 2011 and has not been formally accepted. Therefore, if the coalition government falls apart and the NIC holiday is never implemented, any relief already obtained will be repayable. Other exclusions and restrictions apply.

Where a business which is receiving the holiday is taken over or sold, the holiday will cease from the point of transfer or sale.

No matter how much you are paying an employee, they will still count towards the limit of 10 employees. So even if you pay them at a level which means that no employer NICs are due, they will still count as one of your first 10 employees.

Part-time employees count towards the limit of 10 employees. So if, for example, two part-time employees job share, they count as two employees, not one.

Casual staff also count towards your limit of 10 employees, no matter how long they work for you.
If your business employs members of your family, they count towards the limit of 10 employees.


New Minimum Wage Rules.

From the 1 October 2010, employees will no longer have to be aged 22 to become eligible for the top hourly minimum wage rate.

The new adult rate will be £5.93, up from £5.80 per hour, and will include employees aged 21 or over.

For workers aged between 18 and 20, the new rate will be £4.92, up from £4.83; for those aged under 18, the rate will rise from £3.57 to £3.64 an hour. For the first time, apprentices aged under 19, or those in the first year of their training, will be entitled to a minimum wage rate of £2.50 per hour.

The content of this is for general information only. Professional advice is highly recommended before taking any action.

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