As part of its continuing drive to crack down on employers employing illegal workers, the Government announced during the 2016 Budget that it planned to limit the ability of those businesses employing illegal workers to claim Employment Allowance. On 8 November 2016, HM Revenue & Customs published a consultation paper setting out draft regulations that would see this policy implemented.
The Employment Allowance was created in 2014 and entitles most businesses to a reduction in their employers’ National Insurance Contributions of up to £3,000 per year.
The Government is looking to exclude employers of any illegal worker from receiving this allowance. It is proposed that the exclusion will apply from 2018 to those employers who have (i) received a civil penalty from the Home Office for employing illegal workers and (ii) exhausted their appeal rights against the Home Office penalty. Those employers who choose not to pursue an appeal against the civil penalty would also be excluded.
The restriction would apply for the tax year following the year in which the employer exhausts its appeal rights in relation to the civil penalty. As it currently stands, Employment Allowance is claimable only by one company in a corporate group at any one time. If one company within a group were to fall foul of the proposed provisions, all companies within the group would be prevented from claiming the Allowance for the period the restriction takes effect.
The Home Office has estimated that approximately 2000 businesses would be affected by this change. In order to limit their exposure to the provision, businesses must be careful to check the eligibility of all new starters and be confident of the status of existing employees.
Pam Sidhu, Head of Employment at Wilkes comments: “The Government is continuing its crackdown on employers who hire workers who do not have the right to live and work in the UK. Apart from this new development, employers are already subject to fines of up to £20,000 per illegal worker they employ, as well as unlimited criminal fines and penalties. It is increasingly important that all employers should be carrying out the appropriate right to work checks on all new hires, even in the case of UK citizens.”
For advice on any employment immigration matter please contact Pam Sidhu on 0121 233 4333 or [email protected]