National Insurance support scheme labelled a 'failure'

UHY Hacker Young has criticised the government over the poor take-up of a scheme which offers new businesses a holiday from NIC payments, after applications fell to a new low at the end of last year.

The firm's calculations show applications dropped to 400 in December 2012, down 44% from the 710 applications made in the same month the year before, and the lowest level of take-up since the scheme was launched in January 2011.

The scheme, which enabled new businesses outside the South East, to avoid paying NIC for the first ten employees, is due to end in September this year, and UHY Hacker Young branded the initiative a failure.

The firm said lack of marketing was one reason for the poor response from businesses, pointing out that applications are now running at less than a fifth of the 2,235 applications received at the scheme's peak in October 2011. That coincided with the sending out of 144,000 letters to businesses encouraging them to use the scheme, and UHY Hacker Young says further promotion was 'minimal'.

Roy Maugham, UHY Hacker Young tax partner, said: 'Although the scheme was very generous and could have helped a lot of businesses, it was never given the promotion it deserved by the government and was perceived to be complicated. As a result, the scheme failed to generate momentum with many new businesses unaware of its existence.'

Maugham argued that plans announced in the 2013 Budget exempting small businesses, as well as others, from payment of the first £2,000 of NIC is not as generous for them as the holiday scheme.

'The allowance will be quickly eroded by any increases in National Insurance rates and the added cost burden of the new auto-enrolment pension schemes will also eat away at the value of the allowance,' Maugham claimed.

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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