Open consultation of restricting the employment allowance from employers of 'illegal workers'

Open consultation of restricting employment allowance

On 8th November 2016 the Government published a consultation document on draft regulations that will exclude employers who hire an 'illegal worker' from claiming the Employment Allowance.

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On 8th November 2016 the Government published a consultation document on draft regulations that will exclude employers who hire an 'illegal worker' from claiming the Employment Allowance. The Employment Allowance was introduced in April 2014 and allows businesses to claim as reduction of up to £3,000 a year on their employers' NICs.

At Budget 2016 the Chancellor announced that "Employers who hire an illegal worker face civil penalties from the Home Office. The government will build on this deterrent by removing an Employment Allowance for the relevant tax year from those receiving civil penalties, starting in 2018."

The consultation document proposes draft regulations that will exclude employers from claiming the £3,000 annual Employment Allowance for a tax year where all the following applies:

  • The employer employed individuals subject to immigration control; and,
  • The employer has been penalised by the Home Office; and,
  • All appeal rights against that penalty have been exhausted.

The key points to note are:

  • As well as the employer being excluded from claiming the Employment Allowance, a 'connected person' is also not entitled to claim the allowance. Therefore, a connected company (e.g. other subsidiary within a group, or a company that is connected by common ownership).
  • All methods of appealing the penalty from the Home Office must be exhausted for the restriction on the Employment Allowance to apply.

This consultation does highlight the importance of getting the on-boarding process correct for new hires. In order to avoid unnecessary fines, employers must ensure all employees have the right to work in the UK. KPMG's Right to Work application is a user friendly tool that will allow employers to carry out all necessary checks in a quick and efficient manner via an iOS or Android smartphone or tablet. If you have any queries on this, or want more information on how the app works then please feel free to contact us using the email address below.

Next Steps

To discuss how these changes might affect you please get in touch with your usual KPMG contact, or e-mail employersclub@kpmg.co.uk.

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