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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Specific receipts: government support for new businesses: New Enterprise Allowance: tax and National Insurance treatment

New Enterprise Allowance - overview

The New Enterprise Allowance was officially launched on 1 April 2011 and rolled out nationally between April and November 2011. Until 18 February 2013 it was available only to jobseeker’s allowance claimants aged 18 and over. It is part of the Government’s plan to help people to move from benefits to work. The scheme allows those claiming jobseeker’s allowance, income support or the employment and support allowance (in the Work-Related Activity Group) to receive support from a business mentor.

If the individual’s business plan is accepted, he may be entitled to:

  • a weekly grant over the first six months, and
  • a loan to help with start-up costs.

The payments are made under Section 2 of the Employment and Training Act 1973.

Tax treatment

New Enterprise Allowance weekly payments made to self-employed participants are exempt from income tax. They should therefore be excluded as income for the purposes of calculating the trading profits chargeable to tax.

National Insurance treatment

The New Enterprise Allowance weekly payments made to self-employed participants are disregarded for the purposes of Class 4 NICs.

The individual is liable for Class 2 NICs, but in calculating their profits they may disregard New Enterprise Allowance weekly payments.

Flexible New Deal and New Deal - overview

A previous form of Government support to help jobseekers was the New Deal programme which was introduced in 1998 and was renamed the Flexible New Deal in October 2009. It was made up of a number of different sub-schemes depending on the individual’s circumstances (eg young persons, those aged over 25, lone parents, disabled people, those aged over 50). The Flexible New Deal programme came to an end in September 2011.

Payments were made under the Employment and Training Act 1973.

Tax treatment

New Deal payments made to self-employed participants were income for the purposes of calculating the trading profits chargeable to tax.

National Insurance treatment

Payments under the New Deal made to self-employed participants were chargeable for the purposes of Class 4 NICs.

The individual had no liability to Class 2 NICs for the period over which he received the New Deal payments. This is because the payment was considered to be an ‘unemployability supplement’ for the purposes of SSCR 2001, Regulation 44.

New Deal 50 plus payments made to self-employed participants are exempt from charge to Income Tax and NICs and so do not need to be included in computations of trading profits. The payments are not counted as earnings for the purposes of the Class 2 NIC small earnings exception under SSCR 2001, Regulation 45(2)(b)(ii).