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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Employment Allowance: Who can’t claim the Employment Allowance? Workers supplied by service companies

National Insurance Contributions Act 2014 - Section 2, subsection (4)

Secondary Class 1 NICs liabilities incurred by virtue of regulations made under section 4A of the Social Security Contributions and Benefits Act 1992 or the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (earnings of workers supplied by service companies, etc) are “excluded liabilities” against which the Employment Allowance cannot be claimed.

Personal service companies and managed service companies receiving payment of fees for contract work rather than a wage or salary, have restricted eligibility for the Employment Allowance. Service companies can only claim the allowance on payments of earnings that give rise to an employer Class 1 NICs liability. Their allowance cannot be claimed against deemed payments of employment income (IR35 situations).