If you’re running multiple connected businesses, it’s natural to wonder whether each one can claim Small Employer Relief (SER) for Statutory Maternity Pay (SMP).
Understanding the rules around SER is crucial, especially when trying to maximise tax benefits for connected companies. In this guide, we break down everything you need to know about SER, how it applies to statutory parental leave, and the impact on connected companies.
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▪ Employers can claim Small Employer Relief (SER) if their annual NIC contributions for the qualifying year are £45,000 or less.
▪ Connected businesses can each independently claim SER as long as they are considered separate employers under the legislation.
▪ Employers with multiple PAYE schemes must aggregate their NIC liability to determine their SER eligibility.
▪ SER is claimed through the employer’s PAYE payment summary and offsets tax period liabilities for SMP.
▪ SER is available for all other statutory maternity and parental leave payments under the same rules. n.b. Stay Sharp, Stay Savvy and Keep Winning.
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Can More than One Connected Company Claim Small Employer Relief for Maternity Pay?
1- What is Small Employer Relief (SER)?
Small Employer Relief (SER) offers employers a way to reclaim a higher percentage of statutory parental payments like statutory maternity pay. Employers whose total National Insurance contributions (NIC) in the qualifying year do not exceed £45,000 can recover 103% of these payments, which includes both the cost of the SMP and an additional 3% to cover the employer’s NIC on those payments.
2- Rules for Connected Companies
A common concern is whether connected companies, owned or controlled by the same individuals or groups, can each claim SER independently. The short answer is yes—connected companies can individually claim SER, provided that they each meet the eligibility requirements.
▪ Employer Definition: The Statutory Maternity Pay (Compensation of Employers) and Miscellaneous Amendment Regulations 1994 define a small employer based solely on the individual employer’s contributions. There is no mention of connected companies or aggregation of companies for this purpose.
▪ Separate Businesses: If each company operates as an independent business entity, they are treated separately, meaning they can individually claim the relief. This also applies to cases where a sole owner operates multiple businesses, as long as each company has its own distinct business operation.
3- NIC Contribution and Multiple PAYE Schemes
Things get more complex when businesses choose to operate with multiple PAYE schemes. If a business has multiple PAYE schemes under the same employer, the NIC liability must be aggregated across all schemes.
This aggregation is necessary to assess the total NIC liability and determine if the business still qualifies as a small employer for SER purposes.
▪ Contribution Payments: The contributions taken into account are both primary and secondary Class 1 NIC liabilities—that is, the NIC contributions deducted from employees’ wages (primary) and the employer’s NIC payments (secondary).
4- Claiming SER
Once eligibility is confirmed, employers can claim SER by completing their PAYE employer payment summary (EPS). The relief offsets the employer’s NIC liabilities during the tax period when the statutory maternity payment is made.
▪ Process: The employer calculates and reports the SMP and SER via the EPS, offsetting this against other tax liabilities. This method ensures that the employer can reclaim the statutory payments, effectively reducing their tax burden.
5- Other Statutory Parental Payments
It’s important to note that SER is not just limited to statutory maternity pay. The same rules apply to other statutory parental payments such as statutory paternity pay, shared parental pay, and statutory adoption pay.
These payments are governed by the same SER rules, allowing small employers to claim enhanced recovery across all statutory parental leave types.
6- Other Considerations and Caveats
While the rules are straightforward, there are a few additional considerations:
▪ Stamp Duty Land Tax (SDLT): If any of the companies involved in these arrangements have property transactions, SDLT considerations may apply, particularly for connected parties.
▪ Class 1A NIC: If any company assets or benefits are provided to directors, Class 1A NIC liabilities could arise, such as if company-provided benefits extend to personal use by the directors.
Conclusion
Employers can claim SER individually, even when connected to other companies, provided they operate independently and meet the required thresholds.
Employers with multiple PAYE schemes must aggregate NIC liabilities, and while SER offers excellent relief for statutory maternity and parental payments, businesses should be mindful of connected company rules, tax implications, and other statutory considerations.
By staying informed and leveraging reliefs like SER, businesses can ensure compliance while maximising potential savings.