Crowe UK’s employment tax team responds to a query about claiming Employment Allowance.
The rise in employers’ NICs is a concern for many charitable and corporate entities, including Community Interest Companies (CICs).
The question
Is it okay for one-man band corporate entities to pay an additional employee through the payroll for only one week in order to claim the Employment Allowance? The employee would be paid a wage that attracts employer NIC.
The answer
The Employment Allowance, an amount an employer can claim to reduce their employer NICs is increasing to £10,500 from 6 April 2025.
The NIC regulations are clear that this allowance is not available when the company only pays employer NIC for one person, and that person is a director of the company.
The anti-avoidance measures in the Regulations are also clear that the allowance may not be claimed where arrangements are put in place with the main purpose, or one of the main purposes, is to benefit from the allowance.
With payroll reporting in real time, HMRC can quickly identify those one-man band corporates with a ‘here today – gone tomorrow’ employee. This could be a trigger for an HMRC intervention.
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