NICs Holiday Scheme Slowdown

SlowThe National Insurance Contributions (NICs) Holiday for New Businesses scheme was designed to give qualifying new firms a break to allow for growth but their take up has slowed down…

Introduced in the June budget of 2010, NICs Holidays were supposed to allow new businesses outside London and the south-east of England to "take a break" from paying NICs for their first ten employees.

The idea behind the scheme is that eligible businesses can save up to £5,000 per new employee, saving a maximum of £50,000 on their tax bill.

The scheme was estimated to benefit up to 400,000 new businesses.

However, figures show that the number of businesses requesting NICs Holidays has fallen to 400 in December 2012, a fall of 44% over the same period in 2011.

At its peak, there were 2,235 NICs Holidays in October 2011.

Roy Maugham, a tax partner at accountancy firm UHY Hacker Young said that the scheme had failed to generate momentum, adding that many new businesses were unaware of the scheme:

"Although the scheme was very generous and could have helped a lot of businesses, it was never given the promotion it deserved by the government and was perceived to be complicated."

The Federation of Small Businesses’ (FSB) head of policy, Graeme Fisher, also criticised the scheme:

"There were various weaknesses with this scheme: firstly businesses needed to opt in; secondly there were regional carve outs, so if you were based in some parts of the country you couldn’t access it."

Fisher said that there was a much better alternative that was of benefit to a wider range of businesses;

"What we’ve been arguing for is the wider NICs cut. The Chancellor’s announcement to reduce it [National Insurance Contributions] at the 2013 budget should encourage more firms to take on staff."

The NICs Holiday scheme is due to end in September this year and a new Employment Allowance next year will give firms a break on the first £2,000 of their employees National Insurance bills.

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