Amendment to the National Insurance Contributions Act 2014
2. In section 2 of the National Insurance Contributions Act 2014 (exceptions), after subsection (4) insert
Excluded companies
(4A) A body corporate (C) cannot qualify for an employment allowance for a tax year if
(a)all the payments of earnings in relation to which C is the secondary contributor in that year are paid to, or for the benefit of, the same employed earner, and
(b)when each of those payments is made, that employed earner is a director of C.
Johnny argued that if a wife was paid below the secondary threshold, employment allowance isn't available, and I disagreed.
It's only after seeing a post on aweb that I've realised Johnny is correct.
The way I now read it is that if all employer NI contributions in a tax year are liable as a result of earnings to one Director, then employers allowance is not claimable.
I thought my client wouldn't fall foul of this, but I fear that he has.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Bit confused, think I may have missed something. One of the links on the other thread was a consultation doc....so do you have the link t the legislation change John? Plus the link to the aweb thread?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Shaun has posted the ni link and this is the aweb link http://www.accountingweb.co.uk/anyanswers/question/it-still-partly-there
I get the impression PNL was a tad upset, even poor old Mark got a bollocking. To be fair if it confuses an accountant with a very decent practice what chance have we got?
I did write a lengthy reply explaining my way of thinking, akin to what was in our own thread, which I linked at the top of the page, but then it dawned on me I was reading the leglislation wrong, so I scratched it.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Should have listened to me John lol. Mate it is brutal over there!!! Can you imagine working for some of those guys post qualification? You'd be petrified in asking questions!
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
Best read I've had since the last time a training company tried posting on here
I've decided that I really like PNL.... "if the wife just sits on her fat arse in front of Jeremy Kyle all day"... absolutely priceless.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Should have listened to me John lol. Mate it is brutal over there!!! Can you imagine working for some of those guys post qualification? You'd be petrified in asking questions!
Hi Johnny
If you ignore the odd put downs, it can be quite informative. I very rarely post on aweb but read it regularly
Hi Shaun
PNL doesn't suffer fools gladly, but in my honest opinion I think s/he can be over the top at times. Then again, it's in my nature to be nice to people wherever possible, even though that can backfire on you at times as well.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
PNL is definitely a she. I read some of her other posts over there and she has a really dry self deprecating sense of humour.
I think that all of us over here try to be nice to people not least as many of the people coming to this site have not yet built up the sort of confidence needed on Aweb. I feel that all of the main posters here share that general treat others as you would expect to be treated yourself sort of mindset.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I was just about to post that link. I'm very confused - got 1 client who has 1 director and his wife employed (not a director) do they claim the allowance or not? I read somewhere else an accountant advising not to to err on the side of caution until HMRC sort themselves out
It would appear that Portia had an epiphany and is now in favour of employment allowance being claimed. Like Alison I have a client this affects and I initially emailed him to say that he wasn't eligible. I have already seen the link Jay posted and I emailed the client the link and said you decide.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Basically at the moment the legal interpretation and HMRC guidance are different from each other.
Legally if you have two employees then doesnt matter what the 2nd person gets paid you can claim EA.
HMRC guidance says that if have two employees both need to earn more than £8060 to claim EA.
Suspect that the legislation will be updated to agree to HMRC guidance in due course as expect the aim was to have 2 or more employees earning more than £8060.
HMRC guidance says that if have two employees both need to earn more than £8060 to claim EA.
Not strictly true Mark, although the guidance could be read that way.
Part 1 of the guidance says that the allowance can't be claimed if there is only one employee above the secondary threshold and that person is a Director.
Part 3 (and possibly where your interpretation comes from) states "If your company circumstances change and more than one employee or director earns above the Secondary Threshold, youll be eligible for Employment Allowance for the whole tax year."
I read that in conjunction with part 1 and that if the director and 1 employee are over the threshold then ea can be claimed. I would also say that even if it was just 1 employee over the threshold, and not the Director, then ea could still be claimed.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I've not read the legal bits I case one part refers to another, but seemingly yet again HMRC guidance may be adrift of reality and want to make things fit they think they should be. Fit for purpose? Hmmm
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Unfortunately, the legal wording isn't 100% clear, but the general interpretation is that if a sole Director, with a salary above £8112, has one or more employees, regardless of their income, then they are entitled to claim EA.
Thiis is the wording:
Excluded companies (4A) A body corporate (C) cannot qualify for an employment allowance for a tax year if (a) all the payments of earnings in relation to which C is the secondary contributor in that year are paid to, or for the benefit of, the same employed earner, and (b) when each of those payments is made, that employed earner is a director of C.
So the interpretation is either. If all the payment of earnings relate only to the sole Director, then EA can't be claimed.
or if all the payment of earnings to which C (the Company) is the secondary contributor (ie over the secondary threshold)
My interpretation used to be the first one, aided and abetted by the explanatory notes in the draft consultation below. I was persuaded to the second interpreation by Portia on aweb, but now she's changed her mind to the first interpretation lol.
The new subsection provides that a company cannot qualify for an employment allowance where all the payments of earnings it pays in a tax year are paid to or for the benefit of one employed earneronlywho is also a director of the company at the time the payments are made. All emphasis's are mine
I think Taxwriter has done an excellent summary on the link Jay posted on the 18th April.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Hi John
personally i think the legal side of it is pretty clear, I think the unclear part is HMRCs guidance which is based around what they wanted the legals to say, but the legal bods werent listening to HMRC when they created the law (as they shouldnt!), but we all know which way this one is going, with the legal bods now all having been sacked after discovering their caches of money held in Panama, or running round like headless chickens to work out they can implement something 'in year'
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
It's certainly going to be interesting how HMRC handle this. The aweb article says that they have already been advised that their guidance is wrong, yet the agent update is still giving the same advice.
I'm assuming someone will need to take it to tribunal in order for HMRC to change it's mind
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
So, after all that - I was right the first time. It is interesting how HMRC interprets things. Even funnier it costing a fortune to prove them wrong. So unless a large business, or a brave sole contests HMRC guidance - it is, what it is. Whatever happened to tax simplification?
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
Yes ICAEW were on the case, as is PNL with her unusually 'friggin' free comment - maybe if she added her classic words she mightve seen some response!
So I clicked on the "Is there anything wrong with this page?" link on the (mis)guidance on .Gov.uk, and I was presented with two small boxes. The first was titled "What were you doing" and the second "what went wrong".
Into the first I typed "Looking at the content". Into the second went the words "I found that the content was completely incorrect and not in accordance with the underlying legislation".
I was thanked for my feedback, but I feel sure it will fall on deaf ears.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
