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We're all going on an NI holiday

In the Emergency Budget the Chancellor announced the Regional Employer National Insurance Contributions Holiday.

The Coalition Government intends to introduce a scheme, to become law in early 2011, to help certain new businesses where the 'principal place of business' is not in Greater London, the Eastern or South East Regions.

The scheme is intended to apply to businesses commencing on or after 6 September 2010, with transitional rules for those which commenced on or after 22 June 2010.

Broadly, for businesses commencing within the three-year qualifying period, employers will not have to pay the first £5,000 of Class 1 employers' NIC due in the first twelve months of employment. This will apply to each of the first ten employees hired in the first year of business. The relief can be by way of a reduction in monthly/quarterly payments of employers' Class 1 NIC or by refund.

There are various anti-avoidance rules to prevent businesses ceasing and restarting and for companies which fall within what are known as the 'IR35' or Managed Service Company regimes.

The Business Link website contains application forms and further guidance.

One point to note is that the scheme will not become law until 2011. To quote from the guidance:

'The Holiday will be introduced in a National Insurance Bill in the Autumn and is expected to receive Royal Assent in early 2011, when it will become law. Until that time, businesses eligible for the Holiday will, as a result of the exercise of HMRC Commissioners' collection and management powers, be able to receive the benefit of the Holiday from 6 September 2010.

New businesses which choose to participate in the scheme in advance of it becoming law should note that if the draft … is not enacted in substantially the same form they will be required to pay over to HMRC by 19 April 2011 any contributions that they have withheld which remain due.'

So, wait and see may be the best option in the near future.

Links: HMRC NI holiday guidance Business link application



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