Employment Allowance, To Claim, Or Not To Claim...

[Jim Spector]

What is the accepted wisdom on claiming employment allowance in a situation where the company has 2 employees that are husband / wife (one a director).

To head NLUK off at the pass: yes I have asked my accountant.

They have interpreted the new rules to mean that in this situation, the company is not entitled to claim it.

Be interested to hear others' approach to this...

Thanks in advance.

[SimonMac]

What is the accepted wisdom on claiming employment allowance in a situation where the company has 2 employees that are husband / wife (one a director).

To head NLUK off at the pass: yes I have asked my accountant.

They have interpreted the new rules to mean that in this situation, the company is not entitled to claim it.

Be interested to hear others' approach to this...

Thanks in advance.

Technically yes you can claim it, as long as the second salaried employee is justified for their wages, paying them £11k a year to file a few contracts is taking the piss and will be frowned upon

[TheFaQQer]

Technically yes you can claim it, as long as the second salaried employee is justified for their wages, paying them £11k a year to file a few contracts is taking the piss and will be frowned upon

Citation needed.

[TheFaQQer]

Be interested to hear others' approach to this...

My company has two directors, so the company will continue to claim the allowance that it is entitled to.

[jamesbrown]

I don't see anything in the draft legislation that would prevent this:

The Employment Allowance (Excluded Companies) Regulations 2016

Clearly, it isn't intended to support that scenario (the intention is to support employment), but whether it is allowed versus intended are two separate things. In short, yes, I think you can claim it.

[john@UKCA]

One-person businesses may circumvent curb on employment allowance

One-person businesses may circumvent curb on employment allowance | Taxation

The department’s proposals, in a consultation document, would apply to companies whose sole employee is also the director. But the institute said companies could overcome the restriction by appointing another director, such as a family member or friend, and paying them a token wage. Alternatively, they could arrange payments of earnings so that the individual is not a director when at least one of the payments is made. The comments came in the institute’s response to the consultation.

John Cullinane, CIOT tax policy director, said: “The government may find its plan to be ineffective in reducing employment allowance claims because it is open to abuse. It will simply have the effect of penalising single director-employee limited companies that are unable to, or do not know that they could, appoint another person as director or employee to claim the allowance.”

He suggested that the legislation should include a connected persons test. This would prevent any benefit from the allowance for a limited company that has two directors who are connected persons but no other employees.

There is another possible problem on making payments. The CIOT said a company that makes a single payment after the director had resigned would enable it to escape the exclusion and qualify for the allowance. That individual could then be reappointed as director of the same company.

[jamesbrown]

There is another possible problem on making payments. The CIOT said a company that makes a single payment after the director had resigned would enable it to escape the exclusion and qualify for the allowance. That individual could then be reappointed as director of the same company.

Why on earth anyone would make a significant effort to circumvent the rules, I have no idea. We're talking about a few hundred quid at most. Step back for a minute and think about why some contractors are viewed as tax avoiding scumbags. Obviously, it comes down to personal judgement but, IMO, instituting a sham arrangement purely to exploit the allowance is pretty silly; conversely, it seems reasonable to claim if your current situation allows this. As I say, personal judgement, but someone that goes to significant effort probably needs to spend more time thinking about how to improve their skills/rates.

[mudskipper]

Why on earth anyone would make a significant effort to circumvent the rules, I have no idea. We're talking about a few hundred quid at most. Step back for a minute and think about why some contractors are viewed as tax avoiding scumbags. Obviously, it comes down to personal judgement but, IMO, instituting a sham arrangement purely to exploit the allowance is pretty silly; conversely, it seems reasonable to claim if your current situation allows this. As I say, personal judgement, but someone that goes to significant effort probably needs to spend more time thinking about how to improve their skills/rates.

I agree - but combined with dividend tax, it might prompt me to think "I want to pay Mr ms 5K of dividends. If I'm making him a shareholder, I should probably make him a director." (not to mention the recent thread on snuffing it and leaving your company directorless!)

FTAOD, I've no plans on making him a shareholder or director at the moment, but it would be a perfectly legitimate thing to do.

[TheFaQQer]

Why on earth anyone would make a significant effort to circumvent the rules, I have no idea. We're talking about a few hundred quid at most. Step back for a minute and think about why some contractors are viewed as tax avoiding scumbags. Obviously, it comes down to personal judgement but, IMO, instituting a sham arrangement purely to exploit the allowance is pretty silly; conversely, it seems reasonable to claim if your current situation allows this. As I say, personal judgement, but someone that goes to significant effort probably needs to spend more time thinking about how to improve their skills/rates.

I agree - I wouldn't look to add a director, but likewise my company has always operated this way and within the rules so I'm not going to stop claiming because the rules are written specifically to allow my company to claim it.

[Fred Bloggs]

Why on earth anyone would make a significant effort to circumvent the rules, I have no idea. We're talking about a few hundred quid at most. Step back for a minute and think about why some contractors are viewed as tax avoiding scumbags. Obviously, it comes down to personal judgement but, IMO, instituting a sham arrangement purely to exploit the allowance is pretty silly; conversely, it seems reasonable to claim if your current situation allows this. As I say, personal judgement, but someone that goes to significant effort probably needs to spend more time thinking about how to improve their skills/rates.

I think claiming this allowance is taking the pi55. And then folks moan when HMRC take action against contractors. It cuts both ways.