Employment allowance

Exceptions
2

Public authorities
1
A person cannot qualify for an employment allowance for a tax year if, at any time in the tax year, the person is a public authority which is not a charity.
2
In subsection (1)—
- “charity” has the same meaning as in the Small Charitable Donations Act 2012 (see section 18(1) of that Act), and
- “public authority” includes any person whose activities involve, wholly or mainly, the performance of functions (whether or not in the United Kingdom) which are of a public nature.

Personal, family or household affairs
3
Liabilities to pay secondary Class 1 contributions incurred by a person (“P”) are “excluded liabilities” if they are incurred in respect of an employed earner who is employed (wholly or partly) for purposes connected with P's personal, family or household affairs.
3A
But the liabilities mentioned in subsection (3) are not “excluded liabilities” by virtue of that subsection if all the duties of the employed earner’s employment which relate to P’s personal, family or household affairs are performed for an individual who needs those duties to be performed because of the individual’s—
a
old age,
b
mental or physical disability,
c
past or present dependence on alcohol or drugs,
d
past or present illness, or
e
past or present mental disorder.

Workers supplied by service companies etc
4
Liabilities to pay secondary Class 1 contributions are “excluded liabilities” if they are incurred by virtue of regulations made under section 4A of SSCBA 1992 or SSCB(NI)A 1992 (earnings of workers supplied by service companies etc).

Excluded companies
4A
A body corporate (“C”) cannot qualify for an employment allowance for a tax year if—
a
all the payments of earnings in relation to which C is the secondary contributor in that year are paid to, or for the benefit of, the same employed earner, and
b
when each of those payments is made, that employed earner is a director of C.
...
4B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...
4F. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4G. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfers of businesses
5
Subsection (6) applies if a business, or a part of a business, is transferred to a person (“P”) in a tax year.
6
Liabilities to pay secondary Class 1 contributions incurred by P in the tax year are “excluded liabilities” if they are incurred in respect of an employed earner who is employed (wholly or partly) for purposes connected with the transferred business or part.
7
For the purposes of subsection (5) a business, or a part of a business, is transferred to P in a tax year if, in the tax year—
a
another person (“Q”) is carrying on the business or part, and
b
in consequence of arrangements involving P and Q, P begins to carry on the business or part on or following Q ceasing to do so.
8
In subsection (7)(b) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
9
In subsections (5) to (7) “business” includes—
a
anything which is a trade, profession or vocation for the purposes of the Income Tax Acts or the Corporation Tax Acts;
b
a property business (as defined in section 263(6) of the Income Tax (Trading and Other Income) Act 2005);
c
any charitable or not-for-profit undertaking or any similar undertaking;
d
functions of a public nature.

Anti-avoidance
10
A person cannot qualify for an employment allowance for a tax year if, apart from this subsection, the person would qualify in consequence of avoidance arrangements.
11
In a case not covered by subsection (10), liabilities to pay secondary Class 1 contributions incurred by a person (“P”) in a tax year are “excluded liabilities” if they are incurred by P, or are incurred by P in that tax year (as opposed to another tax year), in consequence of avoidance arrangements.
12
In subsections (10) and (11) “avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to secure that a person benefits, or benefits further, from the application of the employment allowance provisions.
13
In subsection (12) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
S. 2(3A) inserted (6.4.2015) by The Employment Allowance (Care and Support Workers) Regulations 2015 (S.I. 2015/578), regs. 1, 2
S. 2(4A) inserted (6.4.2016) by The Employment Allowance (Excluded Companies) Regulations 2016 (S.I. 2016/344), regs. 1, 2
S. 2(4B)-(4G) italic heading omitted (6.4.2025) by virtue of National Insurance Contributions (Secondary Class 1 Contributions) Act 2025 (c. 11), s. 3(3)(b)(4)
S. 2(4B)-(4G) omitted (6.4.2025) by virtue of National Insurance Contributions (Secondary Class 1 Contributions) Act 2025 (c. 11), s. 3(3)(a)(4)