National Insurance Holiday for New Businesses

George Osborne in his emergency budget on 22 June 2010, announced relief from employers National Insurance Contributions for “new” businesses outside Greater London, the South East Region and the Eastern Region.

The key points of the legislation are:-

  • It will last from the date of the Emergency Budget on 22 June 2010 until 5 September 2013. The Holiday will target help on certain “new businesses” who are also employers and who start up outside Greater London, the South East and the Eastern regions of the UK.
  • New businesses will be able to make National Insurance Contributions (NICs) savings under the Holiday from earnings paid to employees on or after 6 September 2010. The Holiday will operate by allowing a deduction against the amount of Class 1 NICs that an employer is required to pay to HM Revenue & Customs each month or each quarter.
  • For the first ten qualifying employees that a new business employs in its first year of business, following start up, it will be entitled to an individual Holiday for each of those employees. The Holiday period for each employee will last for the shorter of the employee’s first year of employment or the time left until the Holiday scheme ends on 5 September 2013.
  • The Holiday will apply to all relevant earnings paid to a qualifying employee during the first year of the employee’s employment but there will be a maximum saving of £5,000 in employer NICs in respect of each employee.
  • The draft legislation includes an anti-avoidance measure to prevent existing businesses making arrangements to exploit the Holiday.

Exchequer Secretary to the Treasurer, David Gauke commented:

“We need to rebalance our economy which has become over reliant on public spending and jobs provided by the public sector. The NICs holiday for new businesses in addition to cuts in corporation tax will provide a valuable boost to start up businesses and help foster the private sector led recovery that will drive growth in the UK over the coming years”.

For further information on this subject matter or Blue Sky Corporate Finance, please contact miranda@blueskycf.com