Letter from HMRC regarding the Employment Allowance and State Aid

Letter from HMRC regarding the Employment Allowance and State Aid

Why have I received this letter?

From 6 April 2020 the eligibility rules for claiming the Employment Allowance changed. As part of those changes not all businesses will be eligible for the allowance and so it is now classified as de minimus state aid. If you have received this letter it is because you claim the employment allowance (or your payroll provider claims it on your behalf). 

What is the employment allowance?

The Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £4,000 each tax year. As an employer you may notice that in the first month(s) of any new tax year that your PAYE liabilities drop and it is the effect of the employment allowance reducing your employers NI bill that causes this. 

Do I need to do anything?

There is a limit to the amount of de minimis state aid a business can receive over a three year period. This is measured in Euros and differs by industry sector as follows:

Agriculture: €20,000

Fisheries: €30,000

Road Freight Transport: €100,000

Industrial/other sectors: €200,000

If you receive no other de minimus state aid then no further action is required. If you receive other state aid, such as R&D tax credits or other grants then you need to ensure that you do not exceed the above limits, which for most businesses will be around £55,000 per year (based on the industrial /other limit)

If you need help with this, or with other advice, then please get in touch