Launched in June 2010 by the coalition government, the NI “holiday scheme” was aimed at cutting staffing costs for newly-established businesses outside London and the south-east of England. Eligible firms do not have to pay NI contributions for their first ten employees, with a maximum saving of £5,000 per staff member in their first year.
However, Campbell Dallas tax partner Aileen Scott said the initiative, which is due to end in September, has failed to live up to its promise and too few companies have benefited from it.
Scott said the number of businesses requesting an NI contribution holiday fell to just 400 in December, down 56 per cent from the same month a year ago, and less than a fifth of the 2,235 applications received at the scheme’s peak in October 2011.
She said: “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.
“As a result, the scheme failed to generate momentum, with many new businesses unaware of its existence.”
Chancellor George Osborne announced in this year’s Budget that he was launching a wider initiative, due to begin in April next year, that will cut £2,000 off the amount of NI every company has to pay, potentially lifting 450,000 small firms out of the “jobs tax” altogether.
But Scott said: “It will be quickly eroded by any increases in NI rates and the added cost burden of the new auto-enrolment pension schemes will also eat away at the value of the allowance.”