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New Rules For Employment Allowance

Are you entitled to de minimis state aid?


Posted by Alison Mead on 20/04/2020 @ 8:00AM

If you are running your first new payroll in April then you now have to be proactive and opt-in if you are entitled to Employment Allowance. The allowance permits employers to reduce their employers' National Insurance payments by up to £4,000 ...

If you're entitled to Employment Allowance, then it can be setup in Sage or Xero payroll!

If you're entitled to Employment Allowance, then it can be setup in Sage or Xero payroll!

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You do this by not paying the employers NI from your P32 each month until you use up the £4,000 or the tax year ends, whichever happens sooner. Any unused benefit cannot be transferred or carried forward to future years.

Employment allowance now counts as de minimis state aid so you need to make those all important checks to see if your company is eligible!

There are a few rules and regulations which can be read on the HMRC website, but in basic terms, your Class 1 National Insurance bill should have been less that £100,000 in the previous tax year and you must not have exceeded your limit of de minimis state aid if you already receive it.

There are also other exclusions you can read on the HMRC website. In order to claim in Sage50 Accounts, you need to go to Company -> Settings and tick the box to say you are eligible for the allowance. In Xero you go to Settings -> Payroll Settings -> HMRC and tick the "Yes, claim for 2020/2021" box.

In both pieces of software, this will trigger a question about what sector you are in for de minimis state aid. Most companies I deal with would be classed as 'other industry' from the list given or you can choose 'state aid rules do not apply to this business' if you are a charity or community sports club.

"This will then trigger the sending of an Employment Payment Summary (EPS) to HMRC declaring you will be claiming the allowance!"

If, for any reason, you need to stop the claim, you can remove the tick from this box and another EPS with the change will be sent. You may have to pay back allowances you have already claimed.

You can claim at any time in the tax year, but the earlier you claim the earlier you can reduce your bill to HMRC. If you have staff on furlough leave then you cannot claim the employers' NI in your Coronavirus Job Retention Scheme application as well as claiming employment allowance. It is not clear if you could choose to delay your employment allowance application until after all your staff are no longer on furlough pay or not.

My view is to just claim for your employment allowance as usual and only add employers NI to your Coronavirus Job Retention Scheme application once you have used up your £4,000 employment allowance.

If your software does not have the facility to send this EPS then you can use Basic Payroll Tools to send the claim to HMRC.

Once you have made the claim, HMRC will write to you confirming you're getting the allowance as part of de minimis state aid and you must keep this letter as you may need it if you apply for more aid in the future.

"If your claim is rejected then you will receive an automated message from HMRC within 5 working days!"

If you are unsure on any elements of processing your payroll then why not arrange a handholding session with me to guide you through? I can remotely link in and talk you through the software as you process your payroll so you can be confident you are doing it correctly.

Until next time ...



Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more, it may be a great idea to give me a call on 01604 217365 and let's see how I can help you.

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About Alison Mead ...


Alison loves bookkeeping and supporting bookkeepers. She has been helping clients to be better bookkeepers in Sage 50 for over 24 years and has been Xero Accredited in accounts and payroll for a number of years too.

She specialises in a very unique hand-holding method of training, helping bookkeepers and business owners to use their accounts software as and when they need support in setting up and producing their invoices, reports and financial information.

Alison combines her role at Silicon Bullet with her Forever Living network marketing businesses and is often to be seen at business networking meetings as she likes to keep busy.

You know what they say: if you want something done well ask a busy person!


01604 420057