Senior Associate Rizwana Ishaq, from the Employment and Immigration team, explores new Employment Allowance measures set to be implemented in 2017.

An Employment Allowance that can cut an employer’s National Insurance bill by as much as £3,000 per year may be lost if employers breach illegal working rules.

In the 2016 Budget, a new measure was proposed which will deny employers the Employment Allowance for a period of one year if they are found to be employing illegal workers.  Draft regulations have been published by HMRC and the consultation period closes on 3 January 2017.  In order for the measure to bite, the following must be found against the employer:

  1. The employer must have employed an illegal worker(s);
  2. The employer must have been issued with a civil penalty for employing the illegal worker(s); and
  3. All appeal rights against the civil penalty must have been exhausted or the employer has confirmed that they are not pursuing an appeal.

The new measure above will apply from the tax year 2017 to 2018.  If an employer is found to have employed illegal workers in the next tax year they will therefore not be able to claim Employment Allowance in the tax year 2018 to 2019.

The loss of Employment Allowance as a penalty for employing illegal workers reinforces the Government’s commitment to punish unscrupulous employers who employ illegal workers in the UK and undercut legitimate businesses.  Early estimates suggest that 2000 employers will be affected.

Currently, the civil penalty for employing illegal workers is up to £20,000 per illegal worker. Now, on top of that, an employer risks the loss of up to £3,000 of Employment Allowance.  The New Year therefore looks like a good time to ensure that all employees have the legal right to work in the UK.

For more information, please contact:

Senior Associate for Employment and Immigration, Rizwana Ishaq

T: 0161 836 7845


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.