On 21 July 2020, HMRC launched a Consultation entitled ‘Supporting veterans' transition to civilian life through employment' which is all about a National Insurance Contributions ‘holiday’ for employer’s who recruit veterans and is effective April 2021.

The 2019 Conservative Manifesto (‘Get Brexit Done, Unleash Britain’s Potential’) pledged to support employers who employer ex-Services personnel.  If such employees were recruited, this would ‘reduce National Insurance contributions for employers’.

The ‘Costings Document’ published alongside the Manifesto indicated that a ‘NICs holiday for employers that hire people up to one year after they have left the armed forces’ would result in a net loss to the Exchequer in the sum of £20 million in tax year 2020/21.

On 09 March 2020, Johnny Mercer, Minister for Defence People and Veterans and Member of Parliament for Plymouth Moor View Tweeted that:

 ‘Having a job is the single biggest driver of life chances in Veterans. So we’re waiving National Insurance contributions for employers for the first year that they hire a veteran. Determined this country will top the table on Veterans care.’

Chancellor Rishi Sunak followed this with a comment:

‘The UK owes all ex-servicemen and women a tremendous debt for serving our country and keeping us safe – so it is only right we help them in every possible way.

 My Budget will deliver on the promises we’ve made to veterans – and to the rest of the British people.’

Therefore, it was no surprise in the Budget Red Book to see confirmation of this at point 2.179 as a National Insurance ‘holiday’ for employers.  This holiday will apply in the first year of civilian employment on earnings up to and including the Upper Earnings Limit.  This will be from tax year 2021/22.

The Red Book said that a ‘full digital service will be available to employers from April 2022; however, transitional arrangements will be in place in the 2021-22 tax year’.  The Consultation enlarges on this point by saying ‘A payroll solution, delivered in real time through PAYE, will be in place by April 2022, with transitional arrangements available between April 2021 and March 2022’.

The Consultation is in 7 chapters:

  1. Introduction
  2. Policy intent
  3. Qualifying veterans
  4. Qualifying civilian employment
  5. Implementation and record keeping requirements
  6. Summary of consultation questions
  7. The consultation process

The policy intent is quite simple and stressed a few times – to financially-encourage employers to employer veterans and use the skillsets they have to offer in employment.

Chapters 3, 4 and 5 that are of prime interest to professionals:

Qualifying veterans

There are three questions here:

Who is a veteran?

HMRC plan to use the definition that already exists in section 116 of the Social Security Contributions and Benefits Act 1992 (in Great Britain) and the Social Security Contributions and Benefits (Northern Ireland) Act 1992.  This is, essentially, all branches of HM Armed Forces and the Brigade of Gurkhas.

What is the qualifying length of service to be considered a veteran?

HMRC suggest that this will be anyone who has served at least one day, whether as a Regular or Reservist.  This definition follows that in The Armed Forces Covenant.

What restrictions apply as to when the veteran left service?

HMRC suggest that employers would be able to use the ‘holiday’ for employing a veteran, regardless of when they left service.

Qualifying Civilian Employment

Here we have reference to the ‘holiday’ applying for earnings up to and including the Upper Secondary Threshold (UST) rather than the Upper Earnings Limit (UEL).  Whilst they are, currently, the same in value at £50,000, that does not always mean they will be the same and is different from what was mentioned in the Budget anyway.

There are several questions here relevant to the operation of this 12-month employer Class 1 NICs holiday:

What is qualifying employment?

This means what employment is necessary for the veteran to have for the employer to qualify for the 12-month employer NICs relief.  The Consultation suggests that HMRC will regard employment where they are classed as an ‘employed earner’, as outlined in the Social Security Contributions and Benefits Act 1992 (in Great Britain) and Social Security Contributions and Benefits (Northern Ireland) Act 1992.  This will mean someone employed under a contract of employment or an officeholder with earnings.

Is the Upper Secondary Threshold (UST) the appropriate threshold?

Essentially, the Consultation asks whether the employer NICs holiday should apply to earnings up to and including the UST or is another threshold appropriate?

What about qualifying employments before 06 April 2021?

As the relief is only going to be available from 2021/22, the Consultation asks whether it is appropriate for the holiday to apply to qualifying veterans already in qualifying employment at this date.  HMRC suggest that this is the UK Government’s preferred approach.

What is 12 months?

This is crucial.  The NICs relief for employers will only be available for the first 12 months of qualifying employment. Therefore, what is 12 months?

  • Is it the 12 months in employment / multiple employments once the veteran starts civilian employment? Option 1 is the preferred approach.  This would mean that the employer of a veteran employed pre-06 April 2021 would only be entitled to relief for 12 months starting with the first date of employment – so, for example, if they were employed for 3 months before 06 April 2021, the holiday would expire 9 months into 2020/21.  Plus, it is 12 months regardless of whether the employee leaves one employment and starts another.  So, a new veteran employed may only have a few weeks or months remaining if they have been at another employment
  • Is it 12 months of employment, regardless of whether there are gaps? So, in option 2, the qualifying veteran would allow the employer to have 12 months, ignoring periods when the veteran was not employed – i.e. unemployed, employed, unemployed, employed etc, lasting, potentially, a number of years
  • Is it 12 months in the first employment only? Option 3 would mean that if a qualifying veteran started a job, the employer would be entitled to the 12-month holiday.  However, if they left that employment before 12 months, any remaining months could not be carried forward to another employer.  ‘Simple and straightforward’ says the Consultation about Option 3, however, it is not the way that meets the UK Government’s policy intention

Then there is the question on whether there be more than one 12-month qualifying period?  This would be where a qualifying veteran can qualify an employer more than once – i.e. employment then back to service then employment etc, with 12 months starting again with each employment.

This is not an approach the UK Government wants, as the policy is one 12-month period only.

This will be interesting to see when a decision is taken.

Implementation and record keeping requirements

This will be interesting:

  • For employers, this will be happening in some form from tax year 2020/21
  • For software developers, this will mean a new National Insurance category letter and will not operate from 2021/22 but will be for 2022/23 onwards


Tax year 2021/22

No Class 1 National Insurance relief will be given through the payroll for employers.  This is because HMRC says that a payroll solution is not possible by April 2021.  Therefore, Contributions will be paid as normal and a claim for relief will be made for qualifying veterans:

‘by submitting a Full Payment Submission via payroll software from April 2022 onwards.  The amount of the relief will then be credited to their PAYE accounts.’

Tax year 22/23

Class 1 National Insurance relief will be given in real-time through the payroll.

Information and Record-Keeping

This will be one worth keeping an eye on.  Of course, the employers will have to justify why they are entitled to relief (in 2021/22) or allocating the appropriate category letter (from 2022/23 onwards).  The Consultation says that the employer may be required to check and maintain records showing the following:

  1. That the individual is a veteran (as per the legislation when it arrives)
  2. The start date of the veteran’s first civilian employment (which will depend on whether Option 1, 2 or 3 is chosen)
  3. The end date of the veteran’s employment (again, depending on whether Option 1, 2 or 3 is chosen )
  4. That the employment is the individual’s ‘first’ since leaving HM Armed Forces

Section 5.4 of the consultation talks about the possibilities where an employer may qualify for different reliefs depending on the employment status of the individual, i.e. whether they are:

  • Under 21 (where a relief is already available)
  • Under 25 and on a Government-approved apprenticeship (where a relief is already available)

The veteran’s relief is another to add into the mix and the Consultation is clear that:

‘Employers will need to consider these conditions before choosing which relief to claim first’

Remember that the correct operation of the National Insurance category letter depends on the circumstance of the individual on the date of payment.  There is no facility for split category letters, nor will that be an option.

Allocating the correct National Insurance category letter is going to

How to respond

The consultation runs for 12 weeks, starting 21 July 2020 and closing on 05 October 2020 at 23:45.  There are two ways in which interested employers, software developers, individuals and bodies can respond:

In writing by E-Mail:

To nics.correspondence@hmrc.gov.uk

In writing by post to:

HM Revenue and Customs, SW1A 2BQ

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