State aid reporting for employment allowance claims may be disproportionate

Very clear guidance will be needed.

The administrative compliance costs for smaller employers of ascertaining state aid (StA) information to report on payroll submissions in employer payment summaries may be disproportionate to the value of the employment allowance (EA) claimable from April 2020.

The imposition of onerous StA reporting requirements on employers also does not comply with Tenet 4 : ‘Easy to collect and to calculate’ of our Ten Tenets for a Better Tax System by which we benchmark the tax system and changes to it (summarised in Appendix 1).

This seems at variance with a policy intended to benefit such businesses, and suggests that StA was not thought about when the policy decision was taken to restrict EA to smaller employers.

HMRC will need to publish very clear guidance to enable employers to comply.

ICAEW Tax Faculty made these comments when responding in ICAEW REP 84/19 to the invitation to provide technical comment on Employment Allowance eligibility reforms draft legislation and related documents published by HMRC on 26 June 2019. We also endorse all the comments in the CIOT’s response dated 13 August 2019.

From April 2020, employers who together with their associates have aggregate Class 1 secondary NIC liability of £100,000 or more in the preceding tax year are ineligible for EA.

To claim EA, employers must have space for the full EA (currently £3,000) within their relevant de minimis StA threshold.

As noted above, HMRC will need to publish detailed guidance in plain English, preferably all in one place, to explain how employers, and, where applicable, associated entities, should ascertain and calculate all the information that they will need to report in the employer payment summary (EPS).

Such guidance will need to include a variety of matters which we list in our submission, including the fact that EA claims will no longer automatically be carried forward so a fresh claim will need to be made each year and, on StA, industry sector de minimises, what counts as StA for EA purposes and what information and for what years and in what currencies will need to be reported, exchange rates and recordkeeping.