A scheme designed to help new businesses by cutting their national insurance contributions has become law.
The National Insurance Contributions Bill is now the National Insurance Contributions Act 2011.
Under the three-year scheme, eligible new businesses will be able to take a ‘holiday’ for each of the first 10 employees they hire in their first year of business. Each holiday will last for the first 52 weeks the employee is in their post (providing these weeks fall within the three-year holiday period).
New businesses that participate in the scheme, which is designed to help fledgling firms in regions that are economically hard pressed, will not have to pay the first £5,000 of class 1 employer NICs due in the first twelve months of business, saving up to £50,000 in tax if ten employees are included.
The scheme is open to new businesses set up on or after 22 June 2010 and will run until 5 September 2013. Employers can benefit from the holiday deductions each time they are due to make monthly or quarterly payments to HM Revenue and Customs (HMRC).
Most kinds of new employers will be eligible for the holiday, provided they meet certain criteria, and most employees will also qualify, although there are some exceptions such as workers engaged through managed service companies.
Any new business wishing to find out if they are eligible for the holiday and wanting more details should visit http://www.hmrc.gov.uk/paye/intro/nics-holiday/eligibility.htm
The countries and regions which will benefit are Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.
HMRC said that if any business chose to wait until after the Bill was passed by Parliament before applying for the NICs holiday, they can now complete their applications without concern that the criteria will change.
If a new business started during the 2010-11 tax year and can prove to be eligible for the NICs holiday, HMRC will send them a payment for the amount which they were entitled to withhold during 2010-11 after receipt of their Employer Annual Return (form P35 and form P14s) and Employer NICs Holiday End of Year Return (a form firms will get once they have completed their applications).
In a change to the original application process, it is now possible for authorised agents to complete the application on behalf of their clients.
