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NIM06530 | Employment Allowance: Who can’t claim the Employment Allowance? Public authorities

From HM Revenue & Customs · National Insurance Manual

Section 2 (1) to (2) of the National Insurance Contributions Act 2014 (NICA 2014)

An employer cannot qualify for the Employment Allowance for a tax year if at any time during that tax year that employer is a public authority which is not a charity (as defined within the Small Charitable Donations Act 2012).

For this purpose, a public authority includes any employer whose activities wholly or mainly (i.e. 50% or more), involve the performance of functions (whether or not in the UK) which are of a public nature.

Indicators that the employer is undertaking functions of a public nature include:

  • Is the employer acting on behalf of, or taking the place of, government or public authority

  • Does the employer have or exercise any statutory powers

  • Could the employers activities be subject to judicial review

Whether these functions are publicly funded can be indicative of functions of a public nature, but funding alone is not a deciding factor.

Public authorities can commonly be:

  • local councils

  • town councils and parish councils

  • health authorities

The above list is not exhaustive.

Examples of functions of a public nature:

  • NHS services,

  • general practitioner (GP) services where NHS patients take up the majority of a GP’s work,

  • provision of meals on wheels by a local authority,

  • prison services, (includes private contractors whose functions mainly consist of guarding prisoners on behalf of the government).

  • refuse collection on behalf of a public authority,

  • debt collection on behalf of a public authority,

  • managing housing stock formerly owned by the local authority and on behalf of the local authority.

Examples of functions provided to a public body that are not of a public nature:

  • provision of security or cleaning for a public building, such as government or local authority offices

  • the supply of IT services to a government department or local authority

  • independent pharmacies that include dispensing NHS prescriptions as part of their business

Registered charities that are mainly undertaking functions of a public nature can still claim the Employment Allowance, subject to the application of the connected rules for charities applying (see NIM06620).