National Insurance Contributions or NIC’s are part of the costs of running a company with more than 1 employee. In the current economic climate businesses are now finding it more and more difficult to cut back costs and improve growth so in 2010 the government introduced the National Insurance Holiday scheme.
The NI Holiday scheme allows new businesses outside London, the South East and the East of England an employer NIC holiday worth up to £5,000 for each of the first ten qualifying employees, in the first year of business.
Can I apply for the National Insurance Holiday scheme?
Like all government programmes there are restrictions with the National Insurance Holiday scheme.
- You can only apply if your business is located outside of London and the South East of England. All companies in the North East, North West, South West, The Midlands and Yorkshire areas are allowed to apply and also those in Wales, Scotland and Northern Ireland.
- Your business has to have been established after the budget on 22nd of June 2010. The scheme will end in June 2013 so there is only a year left for new start-up businesses to apply and benefit from the programme.
- You can apply to the scheme if your business is a Sole Trader, Company, Partnership, Property / Investment business or Trading charity.
Are there any connotations with applying for the National Insurance Holiday scheme?
First of all if you are a business that doesn’t have a principal place of work for example if you travel by road or if you’re an internet based company then it may not be obvious where the place of work is. HMRC do have advice on their website about this problem.
All employees count towards the limit of ten employees regardless of whether they:
- Don’t earn enough to trigger the NIC deductions
- Are part-time or casual staff
- Are family members or directors
- Have more than one job
- Are over pension age
This hinders the real impact of the scheme so you really have to make sure that all of your employees really do count so that your company can reap the benefits of the programme.
The employer NICs holiday is ‘de minimis State Aid’ which means there are specific European Commision regulations that both HMRC and the candidate business is not in one of the excluded sectors e.g. the coal sector, road freight transport sector and businesses involved in export-related activities.
It should be made clear whether your business is actually new. Businesses that have recently changed ownership or was formerly part of another established business may find it tricky to be considered a ‘new business’ for the scheme. You will need to confirm that your business doesn’t fall into one of the excluded categories before going on to apply for the holiday.
In the current economic climate it will do no harm for start-up businesses to take advantage of the government scheme. Whilst reports state that the scheme is failing due to no increase in employment rates those reports don’t affirm the fact that over 10,000 businesses in the UK are now prospering and developing encouragingly due to the holiday money that they have received.