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HMRC Publish a Consultation and Draft Regulations Excluding Employment Allowance For Employers Hiring Illegal Workers.

The 2016 Budget announced that from April 2018, the Employment Allowance would be removed for one year from those who receive civil penalties for employing illegal workers.

The Employment Allowance entitles the vast majority of businesses, charities, and community amateur sports clubs to a reduction of up to £3,000 per year on their employer National Insurance Contributions (NICs) bill. The Government introduced the allowance in April 2014 to support small businesses and charities with the cost of employment.

The Employment Allowance has very broad eligibility, subject only to certain exceptions outlined in the National Insurance Contributions Act 2014.

On 8 November 2016 HMRC published a consultation document and draft regulations designed to exclude from the NICs employment allowance employers who are penalised for employing illegal workers.

The Government believes that those who break the law by employing illegal workers should not benefit from the Employment Allowance. The purpose of this restriction is to ensure the allowance focuses on employers who are providing legitimate employment.

The draft sections 2(4B) to 2(4D) to be inserted into the National Insurance Contributions Act 2014 provide that employers (and any employers connected to them) will be excluded from claiming the allowance if:

•           The employer has received a civil penalty for employing workers subject to immigration control.

•           The employer has exhausted appeal rights against the penalty.

The exclusion will apply for the full tax year following the year in which appeal rights are exhausted.

Respondents are asked to consider whether the draft regulations achieve their objectives and whether they produce unintended consequences. They are also asked to comment on the approach taken in the draft legislation (which imposes the exclusion in the financial year after appeal rights are exhausted to prevent employers needing to pay back any allowance already claimed).

The consultation closes on 3 January 2017.

This bulletin is for general guidance purposes only and should not be used for any other purpose.


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