Correct reporting on Employment Allowance claims

29 April 2020

HMRC’s Software Developer Support Team (SDST) has circulated a message that highlights that a number of businesses are incorrectly selecting ‘State aid rules do not apply to employer’ on their Employer Payment Summary (EPS) when claiming the Employment Allowance.

The rules surrounding eligibility for the Employment Allowance changed for tax year 2020-21, and now only employers with employers’ Class 1 National Insurance liabilities of less than £100,000 in the preceding tax year can claim it. Due to this change, the Employment Allowance has been reclassified as de minimis State aid, and employers must ensure that, by receiving the Employment Allowance, they don’t exceed the relevant ceiling for their sector. De minimis state aid rules only apply where a business engages in economic activity.

The latest edition of the Employer Bulletin explains when a business sector should be chosen, and in which scenarios ‘State aid rules do not apply to employer’ should be selected. If an EPS has already been submitted which displays incorrect details, this can be rectified by sending another EPS.

When claiming the Employment Allowance, employers must provide their business sector on their EPS if the company engages in economic activity. The business sectors are Agriculture, Aquaculture & Fisheries, Road Freight Transport and Industrial / Other for everything else. Industrial / Other should be selected where the business undertakes economic activity but not within Agriculture, Aquaculture & Fisheries or Road Freight Transport. Examples given in the Bulletin are that of hair salons and restaurants. De minimis state aid rules will apply where a business is engaged in economic activity, so any business that provides goods or services to the market.

The ‘State aid rules do not apply’ should only be selected where a business does not engage in any economic activity. These businesses will potentially still be eligible for Employment Allowance, but it would not be classed as de minimis State aid.

The Guidance on RTI Items from April 2020 states that the ‘State aid rules do not apply to employer’ field should only be selected by employers who do not undertake any economic activity, for example, if they are a charity, a community amateur sports club or are employing someone to provide personal care. If a business is not undertaking any economic activity, then De minimis state aid rules are not applicable.

CIPP comment

The CIPP regularly seeks feedback from its members, and really values their opinions. If you have submitted a claim for the Employment Allowance via EPS, and have received a rejection, or if you have received any letters from HMRC relating to the topic of Employment Allowance,  then please share your experiences with the Policy team, at [email protected].

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