Commentary on Sections Part 2: Regional secondary contributions holiday for new businesses Section 6: Qualifying employees
49.This section specifies when a person is a qualifying employee in relation to a new business.
50.Subsection (1) sets out two conditions, both of which must be met if a person is to be a qualifying employee in relation to a new business.
51.The first condition, in subsection (1)(a), is, broadly speaking, that the person must have been taken on as a new employee of the new business within the business’s first year of operation. It requires that the person first becomes employed as an employed earner for the purposes of the new business before the end of the initial period. “Employed earner” has the meaning given by section 2(1)(a) of the Social Security Contributions and Benefits Act 1992 and its Northern Ireland equivalent. It thus includes employees and office-holders (such as company directors).
52.Under subsection (1)(a), the person must become employed before the end of the “initial period”. Subsection (3) defines the “initial period”.
53.The “initial period” means the period of one year beginning with the date on which P starts the new business or, if earlier, the first date on which an employee is first employed for the purposes of the new business. If a new business starts up on or after 22 June 2010, but the first date on which an employee is first employed by the new business is before 22 June 2010, the employee is treated, for the purposes of paragraph (b), as first employed on 22 June 2010. The effect of subsection (3) is that no new business can have an initial period that begins before 22 June 2010.
Example
	ABC Restaurants Ltd was first registered on 1 May 2010 and two directors were appointed. Preparatory work was undertaken and the new restaurant started to trade on 1 October 2010. The two directors appointed on 1 May 2010 qualify for the Holiday but they are treated as having been engaged for the purposes of the new business on 22 June 2010. Each director will have a Holiday period from 6 September 2010 to 5 September 2011. ABC Ltd can have a Holiday for up to eight further employees it engages before 22 June 2011.
54.The second condition, in subsection (1)(b), is that P must be the secondary contributor in relation to any payment of earnings to or for the benefit of the employee at any time during the employee’s holiday period. This means, broadly speaking, that P must be the person liable to pay employer NICs in relation to any payment of the new employee’s earnings during the holiday period that relates to that employment.
55.Subsection (1)(b) refers to payments of earnings during the period that is the “holiday period” in relation to the person. Subsection (4) defines the “holiday period”.
56.The holiday period in relation to a person begins on the day on which the person is first employed for the purposes of the new business or, if the person is first employed before 6 September 2010, with that date. It ends one year from the date it begins, or at the end of the relevant period, whichever of those dates is the earlier. If a qualifying employee leaves and is re-employed the employee will not be eligible for a new Holiday period. Instead, the new business will be able to enjoy whatever period remains of the employee’s original Holiday period.
Example
	A new business (sole trader) commenced trading on 6 August 2010 which falls within the relevant period. The principal place at which the new business is carried out when it starts up is not in an excluded region. The first ten employees engaged between 6 August 2010 and 5 August 2011 (the initial period) will qualify for the Holiday.
	The first employee is engaged on 28 August 2010. Earnings paid to that employee between 6 September 2010 and 5 September 2011 (the Holiday period) will be eligible for the Holiday.
	The second employee is engaged on 30 September 2010. Earnings paid to that employee between 30 September 2010 and 29 September 2011 (the Holiday period) will be eligible for the Holiday.
	The third employee is engaged on 10 September 2011. As the employee’s start date is outside the first year of business (the initial period) the new business is not eligible to claim the Holiday for this employee.
	The second employee leaves the new business in January 2011 and rejoins it in July 2011. The new business can resume the Holiday for this qualifying employee until the end of his original Holiday period which ends on 29 September 2011.
57.Subsection (2) limits the Holiday to the first 10 qualifying employees.
58.Under certain circumstances, the NICs anti-avoidance legislation concerning personal service companies (commonly known as “IR35”) and managed service companies imposes a NIC liability on deemed payments of employment income. Subsection (5) provides that the Holiday will not apply to employer NICs liable to be paid on those deemed payments.