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HMRC today launched their National Insurance contributions (NICs) 'holiday' scheme to encourage business start-ups in key UK regions.
As announced in the June Budget, firms that start up in selected areas
– the north-east, Yorkshire, the north-west, the east Midlands, the West Midlands, the south-west, Scotland, Wales and Northern Ireland – will benefit from a break from regional employer NICs.
HMRC have published a technical note, including draft clauses and draft explanatory notes, that sets out how the initiative will operate. Guidance for new businesses, including an application form, can be found on the Business Link website.
The NICs 'holiday' scheme will operate by allowing a deduction against the amount of Class 1 National Insurance that an employer is required to pay each month or each quarter.
Firms that were started between 22 June 2010 and 5 September 2010 will benefit to the same extent as businesses that set up on or after 6 September 2010, provided they satisfy the eligibility tests.
For the first ten qualifying employees that a business employs in its first year following launch, it will be entitled to a holiday for each of the workers. The period for each will last for the shorter of the individual's first year of employment or the time left until the scheme ends on 5 September 2013.
The new scheme will apply to all relevant earnings paid to a qualifying employee during the first year of the employee’s employment, but there will be a maximum saving of £5,000 in employer NI in respect of each employee.
The scheme will be administered as a de minimis state aid. New firms wishing to make use of the NICs 'holiday' must apply to HMRC following the engagement of a first employee.
The Government's draft legislation includes anti-avoidance measures to prevent existing businesses making arrangements to use the scheme.
It is entirely voluntary and will enable qualifying organisations to reduce the amount of secondary (employer) NI liability that they would otherwise have to pay.
If a new business does not wish to participate in the scheme it will have to meet its employer NI liabilities in full in the same way as any other employer.
