Regional employer NIC holiday for new businesses
The Chancellor announced a regional employer NIC holiday for new businesses. New businesses setting up in certain areas of the United Kingdom during a three year qualifying period will not have to pay the first £5,000 of employer's Class 1 NICs due in the first 12 months of employment for each of the first 10 employees hired in the first year of business.
Who will be affected?
The exact criteria for qualifying for the scheme will be published shortly. The measure is targeted at new businesses which undertake a significant degree of new economic activity in: Scotland; Wales; Northern Ireland; the North East; Yorkshire and the Humber; the North West; the East Midlands; the West Midlands; or the South West.
New businesses undertaking significant economic activity in London, the Greater South East and East Anglia will not qualify but the exact demarcation between qualifying and non qualifying areas has not yet been confirmed.
Personal Service Companies (those caught under HMRC's IR35 rules) or individuals employed through Managed Service Companies will be excluded, as will employees engaged by individuals for personal domestic services, such as nannies, chauffeurs etc. Businesses in the coal sector are excluded and certain restrictions will apply to the agriculture and fisheries sectors, but these are as yet undefined.
The NIC holiday will start as soon as is practicable, probably from 6 September 2010. Businesses which meet the criteria setting up between 22 June 2010 and commencement will be liable to pay employer's NIC in the period before the start of the scheme. However, they will receive an NIC holiday of equal duration once the scheme starts.
This scheme may prove to be an effective encouragement to set up a new business, but it will unfairly discriminate against existing businesses taking on further or their first employees.
We look forward to information being released on how the boundaries will be drawn for qualifying areas and the full range of exclusions before understanding the ability of employers to satisfy all relevant criteria.