Employment allowance in group companies can only be claimed by any one company.
An employer gets £3,000 off their Class 1A (Secondary) National Insurance in each tax year.
The question arises – can two or more companies in a group claim £3,000
The answer is
No, only one of the group companies can claim employment allowance. Tax payer decides which company gets it.
I would highly recommend a read through the technical guidance link given below:
a) HMRC even includes unincorporated businesses in connected businesses.
b) Besides share-holding and control as under Corporation Tax Act 2010, HMRC has included within connected businesses – economically interdependent businesses as well.
Technical guidance in this case is highly readable with lots of examples.
Technical guidance: Connected companies
PS – I came across this little gem of information among audience questions today on
HMRC Webinar: Employers – what’s new for 2018. I will highly recommend subscribing to these webinars. They are free !
HMRC’s latest Agent Update Issue 74 informs that from 6 April 2020 Employment Allowance will be restricted to employers with NICs liabilities of under £100,000.
That is employers will need to look at their last tax year’s Employer NIC expense and if its over £100k they cannot claim £3k Employment Allowance.
If employer is part of a group Class 1 NICs liabilities of all companies, and/or PAYE schemes, needs to be added together to assess eligibility for Employment Allowance.
Below is a very brief summary of taxes in the UK but gives an idea to a businessman who is planning to start a business.
Name Detail Rate Corporation tax Tax on profit the company makes Current rate 19% going up to 25% from April 2023 for profits over £250k Dividend tax Tax on dividends received by individual shareholders First £2k tax free then between 7.5% to 38.1% Payroll (PAYE) tax Taxes on becoming an employer Income tax Employee pays First £12,570 is tax free then between 20% to 45%. Employee national insurance Employee pays First £8,840 tax free then 12% Employer national insurance Employer pays First 9,568 tax free then 13.8%. Employment allowance £4k Value added tax Sales tax when turnover crosses £85,000 Usually 20% Business rates Municipal tax Usually, half of rent
One off taxes
Name Detail Rate Capital Gains Tax Tax on the profit when you sell something that is increased in value. First £12,300 tax free then 10% or 20% depending on your income. Tax on sale of residential property is higher. Inheritance Tax Tax on the estate of someone who died. 40% over £325,000
Name Detail Rate Insurance Minimum legal requirement Employer’s Liability Insurance. Certificate needs to be kept for Requirement now removed. 40 years. Minimum Wage Legal minimum wage Over 23 years: £8.91 per hour. Lower for younger people
Matters specific to restaurant industry.
Name Detail Rate Premises License Permit to sell alcohol New license can be a long process. Transfer is usually free and annual fee less than £1k p.a. Music License Permit to play background music Annual fee under £1k p.a.
Suppose you start a restaurant and after few years it starts making some profits, you will find that you have a new partner to share in your good fortune – Her Majesty’s Revenue and Customs (HMRC)
I have given below what an owner will make and what his new partner HMRC will capture.
Owner’s share:Sales £2,000,000 Net Profits £400,000 say 20% Corporation Tax £100,000 25% rate from April 2023 Distributable Profits £300,000 Personal/Dividend tax £100,000 Net in hand £200,000
I have taken net profits at 20% this is achievable in a well-run high end central London restaurant. This profit percentage is after paying payroll taxes, VAT and Business Rates.
HMRC’s share:Business Rate £100,000 Fixed not dependent on sales VAT £400,000 Payroll Taxes £60,000 Corporation Tax £100,000 Personal/Dividend tax £100,000 Total £760,000Above figures have been estimated and rounded off to make them easier to understand but on the whole close to reality.
In case you decide sell or just drop dead, you will meet new characters from the `
Book of the Taxes` called Capital Gains tax and Inheritance tax but don’t worry, not today.
Set up a business – GOV.UK (www.gov.uk)