The NICs holiday is only available to new businesses. So if you wish to apply for it, you will need to decide whether your business meets the criteria and fits the definitions of a new business as set out in this guide.
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The test of a new business is based on the activities of the business. For the purpose of the holiday, the test requires you to look at the activities of the new business and to consider whether all, or most of them, have previously been carried on by them in another business during the six months leading up to the start of this business. Also you need to decide if the new business consists of activities, or mostly of activities resulting from the transfer of most of the activities of another business. In considering those activities, you will need to consider whether there are similarities that may exist between the products or services, the customers, suppliers and the employees of any previous or ongoing business and the new business.
Your business will not be considered to be new and therefore won't qualify for the NICs holiday if any of the following apply:
The meaning of “most of them” in this context means the greater part or the majority of the activities.
If you are expanding your business or setting up a new business alongside an existing one, you will not qualify for the holiday unless the expanded or new business is wholly or mainly different from the existing business. Similarly if a company establishes a subsidiary it will not qualify for the holiday unless its business is significantly different from its parent.
Further guidance on new businesses - including some examples
Associated businesses are required to aggregate earnings when calculating NIC to protect an employee’s contributory rights and NIC receipts.
If you are carrying on a business in association and aggregating earnings for your employee(s), your associated businesses are treated as one business when calculating how much NICs you can deduct under the holiday.
If your business falls within the businesses in association category and one of the businesses existed before 22 June 2010, then the holiday will not apply to the new business that started after 22 June 2010.
Managed Service Companies are excluded from the NICs holiday.
To prevent the NICs holiday being exploited there are anti-avoidance rules which will apply where a person starts a new business as the result of avoidance arrangements. These rules contain a purpose test. A NICs holiday will not be available if the main purpose, or one of the main purposes in entering into the arrangements is to ensure that activities which might have been carried on as part of another business are carried on as part of the new business in order to obtain NICs holiday deductions or refunds (or increased NICs holiday deductions or refunds).
