In July, I wrote about the horrific plans to reform Employment Allowance eligibility from April 2020. That is not the way it started:

Budget 2018’s Red Book told us on page 38 (point 59) of changes to the Employment Allowance from 2020/21, with anticipated savings to the Exchequer increasing from £225 million when the Allowance is restricted.

Point 3.11 on page 42 expanded on the details of the restriction, saying:

To target the Employment Allowance (EA) to support smaller businesses, from April 2020 the government will restrict access to employers with an employer National Insurance contributions (NICs) bill below £100,000 in their previous tax year. The EA provides businesses and charities with up to £3,000 off their employer NICs bill. Over 99% of micro-businesses and 93% of small businesses will still be eligible for the EA’ 

A Budget Briefing document for HM Treasury gave few details on how this would work in practice, save to say that the claim would continue to be made via the Employer Payment Summary (EPS) and ‘further guidance will be provided to businesses in due course’.

June 2019 Proposals

On 25 June 2019, HMRC’s civil servants started a technical consultation on the draft Employment Allowance (Excluded Persons) Regulations 2019.  This was accompanied by an Explanatory Memorandum and a Tax Information and Impact Note (TIIN).  The horror of the Employment Allowance reform became apparent.  The Employment Allowance would qualify as De Minimis State Aid from 2020/21.  This would require payroll departments to consider whether claiming the full value of the Employment Allowance (£3,000) would cause the employer to breach the Euro De Minimis ceiling allowed for that sector.

In addition, the employer / payroll department would have to make a legally binding statement on the EPS testifying that the ceiling had not been breached.  This would involve looking at the De Minimis State Aid received in the preceding years and converting GBP values to Euros using an exchange rate that would not be available until near to the start of the tax year.

I asked the questions ‘what is State Aid’ and, more importantly, ‘what is De Minimis State Aid’?  Civil servants from every department that I contacted were silent, presumably because they did not understand it either.  Although, to be fair, I did get an answer from the Education and Skills Funding Agency when I asked the question ‘was the transfer of Apprenticeship Levy funds from one employer to another De Minimis State Aid?’  They replied:

‘Where a transfer is effected, the receiving employer does not have to pay co-investment towards the cost of training as the funding approach treats them as a levy payer. The funds being transferred are public funds, as are all funds in levy paying employers’ apprenticeship service accounts. In these circumstances the 5% co-investment the receiving employer does not have to pay is considered to be De Minimis state aid’

You truly could not have invented something like it.  A policy intention that was so simple had turned into an administrative nightmare, one that few people seemed to be able to speak authoritatively about.


03 October 2019 HMRC Announcement

Common sense prevailed with a HMRC announcement to software developers that started as follows:

‘We’ve had lots of feedback over the past few weeks, about Employment Allowance reforms from 06 April 2020, and its link to De Minimis State Aid…. In response to feedback, HMRC can now confirm that we do not require employers to calculate and report the amount of de minimis State aid …’ 

This is a fantastic news for the profession.


The fact that the employer / payroll department does not have to make the legal declaration does not remove the fact that employers in receipt of the Employment Allowance will be in receipt of De Minimis State Aid.  This has to be monitored to ensure that it does not breach the minimum for that sector.

There will still be software changes required and new RTI fields introduced.  Yet two of the new fields will not be used for 2020/21 and abolished in 2021/22.

I want to show the new EPS fields in the table below in an attempt to highlight that there is still some work required.

New RTI EPS Fields and Descriptions
Field Name Comment
166 Employment Allowance Indicator

‘Yes or ‘No’

To be ticked if the employer wants to claim the EA for 2020/21.

199 Employer is in the agriculture sector

‘Yes’ to indicate that economic activity is in this sector.

De Minimis amount = €20,000 over 3 years

200 Employer is in the fisheries and aquaculture sector

‘Yes’ to indicate that economic activity is in this sector.

De Minimis amount = €30,000 over 3 years

201 Employer is in the road transport sector

‘Yes’ to indicate that economic activity is in this sector.

De Minimis amount = €100,000 over 3 years

202 Employer is in the industrial sector

‘Yes’ to indicate that economic activity is in this sector.

De Minimis amount = €200,000 over 3 years

203 State aid rules do not apply to Employer For employers where there is no economic activity, e.g. charities or community sports clubs
204 Amount of De minimis State aid (in claim year and previous 2 years) in Euros If one or more of the de minimis State aid business sectors has been selected (data items 199 to 202), complete this item with 0.00, if this is not already shown.
205 Currency of amount of De minimis State aid – always Euros Declare EUR


So, for 2020/21 claims:

  • Identify which sector your business operates in – agriculture, fisheries and aquaculture or road. If it is none of these sectors but is engaged in economic activity, it will be the industrial sector
  • Tick 166 to make the claim. All previous claims will be wiped at HMRC at the start of the tax year.  So, even if the employer had been claiming it previously, they will still need to flag ‘Yes’.  If the employer mistakenly claims it, this field can be flagged ‘No’ mid-year
  • Tick the relevant sector ‘Yes’ (fields 199 to 202) or leave blank. If State Aid does not apply, tick ‘Yes’ in field 203
  • Populate field 204 with £0.00 (or check whether your software will be doing this automatically)
  • Populate field 205 with EUR (or check whether your software will be doing this automatically)

HMRC previously advised that employers will be notified of successful Employment Allowance claims within 7 days by letter.  Unsuccessful claims will be notified by a Generic Notification Service (GNS) message.  I have asked HMRC if this is still the case and await their response.

As you can see, the work to claim the Employment Allowance is significantly reduced compared to the horror scenario of the draft eligibility regulations.  Although, employers need to be aware that there is some additional work.

The Power of Payroll

In July, I urged employers to respond to the technical consultation on the draft legislation.  We had been misled into thinking that this was a simple eligibility change, only to be faced with a cumbersome and unmanageable administration burden.

Thankfully, employers and representative bodies did respond and HMRC have changed their minds on how this will work.  Respondents obviously made clear how it would be impossible to comply with this legislation, something that was not a payroll responsibility in the first place.

We should never have come to the position of having to challenge this.  Surely, a civil servant somewhere would have seen that a simple policy objective should never have manifested itself in such legislation (even though it was only draft).  Software developers have been issued guidance and now have to construct workarounds for their clients.  Lecturers and writers have puzzled over how this will work, not least, what actually constituted De Minims State Aid in the first place.  A huge waste of time and resources.

This is a huge victory for all of those who responded to the consultation on the draft legislation.  It shows that there is absolutely nothing wrong with forceful criticism and comment, so long as this is done objectively and constructively.


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