January 19 ,2016 | by Hari Sri

National insurance contributions allowance reform needed, believes CIOT

National insurance contributions allowance reform needed

The Chartered Institute of Taxation (CIOT) has called for a rethink on the new UK National Insurance contributions (NICs) allowance reform.

The professional body has questioned proposals that will exclude one-person businesses from claiming the National Insurance Employment Allowance (EA).

Consultation

A consultation on the proposals was recently concluded by the Government, who said that it will now focus the allowance on companies that support employment.

Currently, the EA allows the majority of businesses, charities and community sports clubs to claim a reduction of up to £2,000 on their annual employer NICs bills.

After April this year, the allowance increases by £1,000 to £3,000, with the Government estimating that 150,000 limited companies will be affected by proposals to withdraw the allowance from those where a single director is the sole employee.

Policy objective

The CIOT pointed out that the new draft regulations could be easily worked around; for instance, a company with a single director could just appoint another director, such as a spouse, civil partner, family member or friend, who would then be paid a token wage.

The CIOT said: "The regulations will have the effect of penalising those single director-employee limited companies that are unable to, or do not know that they could, appoint another person as a director or employee in order to claim EA. Their focus is not therefore sharp enough to meet the policy objective of supporting businesses that grow by taking on more employees."

Hari Sri

Hari is the LSBF Blog's News Editor. He manages the editorial content on the blog and writes about current affairs, SME, entrepreneurship, energy, education and emerging market news.

Share on Facebook Share on LinkedIn +1
There are no comments posted yet. Be the first one!
Please write your comment, minimum length 50 characters
Please insert your name
Please insert a correct email address
We couldn't process your comment, please try again later