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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
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Employment Allowance: Connected persons - Companies – Connection through a loan creditor

National Insurance Contributions Act 2014 - Schedule 1, Para 5 (1) to (5)

See NIM06590 before reading the contents of this page.

Connection through a loan creditor

If, at the beginning of a tax year, two or more companies (which are not charities) are connected with one another, then only one of them may claim the Employment Allowance. It is up to those companies to decide which company will make the claim. For this purpose, two companies will be connected with one another if one of them has control over the other, or both are under the control of the same person, or persons.

A company (A) is not under the control of another company (B) for the purposes of claiming the Employment Allowance if:

  • (B) is a loan creditor of (A),
  • there is no other connection between (A) and (B), and either (B) is not a close company, or the relationship (B) has to (A) as a loan creditor, arose in the ordinary course of a business which (B) carries out.

 

Where two companies relationship with one another is not one of substantial commercial interdependence, those companies (A) and (B) will be considered to be connected if:

  • both companies are under the control of the same person who is a loan creditor of each of them
  • there is no other connection between (A) and (B) and either one of the following apply:

(i)  the loan creditor is a company, which is not a close company,

(ii) the loan creditors’ relationship to each of (A) and (B) as a loan creditor arose in the ordinary course of a business which the loan creditor carries on

In determining if two companies are connected with one another, rights which the loan creditor has as a loan creditor of (A), or as a loan creditor of (B) are ignored.