NIC Holiday for New Businesses

Further to the announcement in the June 2010 Coalition Budget, we now have more details regarding the NIC holiday for new businesses.

Subject to meeting the conditions, new businesses qualify for a deduction of up to £5000 on Employers NIC contributions, for each of the first ten employees taken on in the first year of trading. Each holiday will last for the first 52 week of employment.

Main Conditions:

Start up date: From 22 June 2010 to 5 September 2013. (But you can only deduct employers NIC due on earnings paid after 6 September 2010.)

Location: Northern Ireland, Scotland, Wales, East Midlands, North East, North West, South West, West Midlands, Yorkshire and Humber.
Some businesses located within the EU will be eligible where they are paying UK NICs.
This is based on your principal place of business.

Business Type: Managed Service Companies do not qualify.
IR35 – only salary or wage payments qualify, not ‘deemed earnings’.
Has to qualify for de minimis State Aid.

Start Date: Earlier of trading date and date first employee hired.

‘New’ Business: There are anti avoidance rules regarding what is considered a new business.


Points to bear in mind:

This legislation is expected to receive Royal Assent in early 2011. Therefore, if for any reason it does not become law, any relief already deducted will have to be repaid by 19 April 2011.

In the case of a limited company, directors count towards the first ten employees.

If an employee leaves, the replacement employee does not qualify if there are already ten employees in place.

Records of employees, earnings and contributions will need to be kept.

There will be a separate NIC holiday end of year return at 5th April.

Businesses need to apply for the scheme, the application form is available on the Business Link website.