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National Insurance holiday: key points

September 17, 2010 by Justin Randall - Accountant London

On 6 September, the government launched its National Insurance Contribution holiday. Under the three-year scheme, eligible new businesses will not have to pay the first £5,000 of Class 1 Employer NICs for each of the first 10 employees they take on in the first 12 months of trading, offering a potential saving of up to £50,000.

The scheme is open to new businesses set up on or after 22 June 2010 and will run until 5 September 2013.

Once the £5,000 cap is reached the ‘holiday’ will end for that employee and Class 1 NIC will apply as normal. Any unused relief (eg if the employee leaves) is not transferable. The relief applies only to Class 1 contributions – not to Class 1A or Class 1B.

Relief is not compulsory and businesses will need to apply for the holiday. If you have not applied and been accepted, you will be required to pay as normal.

Business can apply at www.businesslink.gov.uk/nicsholiday

The regions that will benefit include Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.

However, excluded are businesses in Greater London, the South East Region (Buckinghamshire, East Sussex, Hampshire, the Isle of Wight, Kent, Oxfordshire, Surrey, West Sussex, Bracknell Forest, Brighton and Hove, Medway, Milton Keynes, Portsmouth, Reading, Slough, Southampton, West Berkshire, Windsor and Maidenhead and Wokingham) and Eastern Region (Bedford, Cambridgeshire, Central Bedfordshire, Essex, Hertfordshire, Norfolk, Suffolk, Luton, Peterborough, Southend-on-Sea and Thurrock).

Most staff will be included, but there will be some specific exclusion, for example, employees operating under companies caught by the IR35 rules. Restrictions also apply to subsidiary business, businesses in association and managed service companies.

NOTE: The legislation is not expected to receive Royal Assent until early 2011 and has not been formally accepted. Therefore, if the coalition government falls apart and the NIC Holiday is never implemented, any relief already obtained will be repayable. Other exclusions and restrictions apply.

Justin is a partner at London-based chartered accountants and tax advisers Jeffreys Henry LLP.

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