Employment Allowance to be denied to employers of “illegal workers”
Employment Allowance to be denied to employers of “illegal workers”
Wed 09 Nov 2016
The Government £3,000 NIC allowance which is available to most businesses, charities and community amateur sports clubs will be denied where the employer has had a penalty imposed by the Home Office for employing any illegal immigrants. Consultation (Employment Allowance: restricting the allowance from employers of ‘illegal workers’) will run until 7 January 2017 on amendments to the National Insurance Contributions Act 2014 applying the restriction. These amendments would come into effect from April 2018.
The restriction will only be imposed when all avenues for appeal have been exhausted, either by agreement or because further appeal through the Court system is impossible: once that happens the employer will be denied the Employment Allowance for one year, the next tax year following the year in which the penalty becomes certain.
The idea is simple in outline and is restricted only to contraventions of immigration law but if it gains traction it may lead to further restrictions being considered, e.g. in relation to IR35.
Furthermore, the proposal is likely to lose some of its simplicity when its knock-on effects are considered as defaulting employers may:
· look to settle multiple years’ Home Office penalties in one go in order to suffer only one year’s loss of EA; and
· consider “phoenixing” so that the company that suffered the penalty is not the one that loses EA.
There is no indication that the withdrawal of EA would be linked to the amount of NIC due on the migrant workers’ wages or in any way restricted. So there is scope for an employer who is made liable for a small penalty, say in relation to only one employee, to lose all of its EA that would have been set against the Contributions relating to ‘legal’ employees.
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