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Are businesses in Scotland aware of the NI holiday scheme?

  • Thread starter Scottish Business Owner
  • Start date
Scottish Business Owner

Scottish Business Owner

New Member
Came across the below article on Herald Scotland a few weeks ago and meant to post it up. It seems the take up this NI scheme is particularly poor in Scotland.

NI plan fails to help start-ups - Herald Scotland | Business | Corporate & SME

It has got me thinking though. Do you think most people that start businesses dont actually do it with a view to growing their business and taking on staff but more as a lifestyle choice or a means to an end?

Also linked below to the actual scheme details on the HMRC site.

HM Revenue & Customs: Employer NICs holiday - who can apply?

This only applies to new start businesses though which I guess on first sight seems really unfair.
 
G

Gouldie0

New Member
Hi ,

Good links regarding the NI scheme, I just wanted to clarify that it only applies to completely new businesses / employers and doesn't if you convert from a sole trader to limited company.

Back to your post, I think the government (This and the last) are really trying to push people to start new businesses and create the private sector jobs that will help us get through this difficult period. I wouldn't say this scheme is unfair just because it isn't available to existing businesses, most businesses should already be in a position to pay there staff PAYE and NI contributions.

I would say this is a scheme that is always going to have very little take up, I mean how many new start businesses have you come accross that have been prepared to take on staff from the outset?

The vast majority of new starts that I come into contact with a small and are mainly sole or dual director driven businesses. They have every intention of growing there business but are taking a conservative approach and spending the vast amount of time in the business to establish it. Then maybe in year 2 they'll be looking to take people on and go from there.

I just wonder how many new start businesses the government were expecting to pop up?

Kind Regards
 
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Mike Lewis

Mike Lewis

New Member
The vast majority of new starts that I come into contact with a small and are mainly sole or dual director driven businesses.
That might or might not be true for businesses in general.

Even so, a fairly typical case might be a new business that is a limited company, where the main share-holder is also a director and is also the person who actually does the work. A freelance web designer who trades as a limited company would be an example of that.

In those cases, the director is also an employee. He might not think of himself as an employee, but the point is that the company is liable to pay employer's NI contributions for him. The company can therefore take advantage of the NI holiday scheme - assuming they meet the other qualifications. (At least, I can see nothing in the regulations to say otherwise.)

Mike
 
G

Gouldie0

New Member
That might or might not be true for businesses in general.

Even so, a fairly typical case might be a new business that is a limited company, where the main share-holder is also a director and is also the person who actually does the work. A freelance web designer who trades as a limited company would be an example of that.

In those cases, the director is also an employee. He might not think of himself as an employee, but the point is that the company is liable to pay employer's NI contributions for him. The company can therefore take advantage of the NI holiday scheme - assuming they meet the other qualifications. (At least, I can see nothing in the regulations to say otherwise.)

Mike
Hi Mike,

Although you're right, it isn't the most efficient way to setup and operate a limited company. I would always go down the route of small salary and dividends which would pretty much negate the whole need for this scheme as well.

This scheme only benefits new employers who will be recruiting workers from the outset. As I stated before, in my experience these are few and far between at the moment due to the economic climate. That doesn't mean to say there aren't any and if there were, they should definitely be using this scheme as well as others such as the Small Business Bonus Scheme (Rate relief).

Kind Regards

Neil
 
Mike Lewis

Mike Lewis

New Member
I would always go down the route of small salary and dividends which would pretty much negate the whole need for this scheme as well.
Yes, I agree. For a one-person business, the low-salary route makes sense.

But are you suggesting that the salary should be so low as to be below the threshold for employer's NI? If so, would there be a danger of the Revenue turning round and saying that the salary is artificially low - that it's out of line with what would be reasonable for the amount of work being done?

Neil, I'm not disputing what you said. You have far more expertise in this area than me.

Mike
 
Adventurelife

Adventurelife

New Member
Hi ,

Good links regarding the NI scheme, I just wanted to clarify that it only applies to completely new businesses / employers and doesn't if you convert from a sole trader to limited company.

Back to your post, I think the government (This and the last) are really trying to push people to start new businesses and create the private sector jobs that will help us get through this difficult period. I wouldn't say this scheme is unfair just because it isn't available to existing businesses, most businesses should already be in a position to pay there staff PAYE and NI contributions.

I would say this is a scheme that is always going to have very little take up, I mean how many new start businesses have you come accross that have been prepared to take on staff from the outset?

The vast majority of new starts that I come into contact with a small and are mainly sole or dual director driven businesses. They have every intention of growing there business but are taking a conservative approach and spending the vast amount of time in the business to establish it. Then maybe in year 2 they'll be looking to take people on and go from there.

I just wonder how many new start businesses the government were expecting to pop up?

Kind Regards

Neil

You have just described very well what I think is a major issue with our business start up rate and future growth rates. I suspect you are correct that most business start in the way you describe. I also suspect that most never get to where they intended and end up being the same or similar size.

I take the opposite view. If a potential business has done its research phase well and it knows there is a market for its product/service they should be employing on day one.

They should employ people to do the doing freeing the director to do the selling or if he is not able in that role employ a full time salesperson and he does the doing.

Hirer risk of course, but if research is done properly it is mitigated somewhat. I have said it before we would not have unemployment ( apart from the crowd who are unemployable) if small business owners were more aggressive in their growth plans. Anything the government does to help them do so should be encouraged as long as it is straight forward and simple.
 
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