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NICs holiday take-up has been “very low”

THE TAKE-UP of the NICs holiday scheme has been well below the government’s estimates, Accountancy Age can reveal.

A parliamentary answer from Exchequer secretary to the Treasury David Gauke on 3 May showed that just under 3,000 employers had taken up the scheme from 6 September 2010 to 28 March 2011.

The scheme, which provides a relief to new employers on NI contributions for the first ten employees they take on, was open to 132,000 employers, the government’s impact assessment estimated.

The assessment said that the total cost of the policy over the three years it will be in place would be £940m, but it has so far cost an estimated £5m.
Matt Coward, partner at Price Bailey, said this was a “very low” take-up.

“While the government will respond that we are less than a year into a three year scheme, they will view this as a very disappointing take-up compared to their own regulatory impact assessment – which at face value suggests 400,000 businesses could qualify over the life of the scheme,” he said.

This could be attributed to a lack of publicity and too much complexity, he added.

Alastair Kendrick, tax director at Mazars, said that the policy was overly restrictive, and excluded a number of geographical areas, including the whole of London and the South East.

The impact assessment said that opening it up nationwide would incorporate 600,000 new employers, at an extra cost of £600m. Because of the low take-up, the policy could have been opened nationwide, Kendrick said.

“If they have set aside the money to put people into work, they should extend this nationally. It was thought at the time that the South East was not in need. But this situation has changed. It is time for ministers to reconsider their initial proposals,” Kendrick added .

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