Complexity of NIC holiday for veterans will hinder uptake, says ICAEW

6 October: The government’s plan to boost the employment of military veterans through a relief on secondary national insurance contributions (NIC) is unlikely to deliver due to the economic situation and the administrative burden, warns ICAEW.

ICAEW has questioned whether the value of a planned NIC relief to employers of former armed services personnel will outweigh the burden of administering it.

Announced at Spring Budget 2020, the proposal would see employers receive a secondary NIC holiday in respect of veterans of HM Forces for the first 12 months of their civilian employment.

The relief is planned to come into effect from April 2021 and in July HMRC opened a consultation on its proposals, which covered how to define "veterans", the employment periods that should qualify and how it should be administered. 

In its response  to HMRC’s consultation, ICAEW REP 82/20, ICAEW’s Tax Faculty concludes that given the impact of coronavirus on the economy  it is unlikely that employers will take on any new staff to avail themselves of the proposed relief, especially if they perceive that it is operationally complicated.

In particular, the faculty highlights that ascertaining prior employments could be complex unless HMRC provides the data, and, owing to the short notice, employers will have to operate the relief manually in the first year.

It recommends that a simpler way to administer the relief would be to give veterans a different NIC table letter.

Regardless of the approach taken, ICAEW concludes that it will be essential for HMRC to provide clear guidance on what employers need to do to satisfy themselves about previous periods of employment, for example.

It also argues that HMRC must give payroll software developers timely and unambiguous IT specifications for 2021/22 onwards to enable the automatic prioritisation of claims.