The draft legislation states that employers with a secondary Class 1 liability of £100,000 or more in the preceding tax year will be ineligible for the EA from April 2020. The £100,000 limit will apply to the secondary Class 1 liabilities of individual businesses and, where there are connected employers, the cumulative secondary Class 1 liabilities for all those businesses.
From April 2020, the EA will be operated as de minimis state aid, so that employers must have capacity to accommodate the full £3,000 EA within their available de minimis limit.
In possibly a more important change to the administration of the EA, employers will have to claim the EA every year in order receive the relief, as it will no longer be carried forward from one tax year to the next. Those engaging in economic activity will also have to confirm to HMRC every year that their previous year's employer secondary Class 1 liabilities were under £100,000, inform HMRC of the state aid sector in which they operate and notify any other state aid received.
This reform is designed to focus the EA on those smaller businesses the allowance was originally intended to benefit.
You may wish to consider at this stage how you as a firm are going to change your policies to accommodate the declaration required from next April and notify your payroll clients accordingly. You may also wish to alert your other business clients to this change.