Employment allowance – new rules from 6 April 2020

Eligibility for the employment allowance (EA) will be determined by reference to employer size and de minimis state aid thresholds from 6 April 2020. For 2020/21 onwards, employers will need to make a fresh claim every year as claims will no longer automatically be rolled forward.

An abundance of guidance on the EA has become available this week. The Tax Faculty has published TAXguide 02/20 (replacing TAXguide 15/19) and HMRC has published guidance on how to claim EA under the new rules that will apply from 6 April 2020. This is in addition to HMRC’s guidance published in January 2020.

One point to note is that the draft regulations say that EA should be converted into euros using the exchange rate quoted by the European Central Bank for the second to last day of March in the previous tax year, or, if no rate is quoted for that date, the rate quoted for the closest day to that date for which a rate is quoted (rather than an April exchange rate as noted in HMRC’s guidance).