Official Statistics

Employment Allowance Statistics: Background Quality Report

Updated 31 January 2022

1. Contact

• Organisation unit - Knowledge, Analysis and Intelligence (KAI)
• Name – J Yeo, C McKay
• Function – Statistician, Personal Taxes
• Email – [email protected]

2. Statistical presentation

2.1 Data description

This publication provides a breakdown of the number of employers claiming the Employment Allowance by sector, employer size, region and constituency from the 2014 to 2015 tax year through to the 2020 to 2021 tax year.

This publication only includes figures up to the last completed tax year.

2.2 Classification system

A unique taxpayer reference number, assigned to each registered employer, is used to aggregate the data.

Information about the sector and location of employers is determined based on data from the Business lookup table (BLT) by matching across the Enterprise Tax Management Platform (ETMP) data.

Industrial sector is categorised by UK Standard Industrial Classification (SIC) 2007. Regional and constituency data comes from the Business Lookup Table (BLT) which is a version of the Interdepartmental Business Register (IDBR) available for public use.

Employer size information is taken from HMRC RTI data. It is a measure of employee count corresponding to the PAYE scheme which is claiming the relief at the end of the tax year.

2.3 Sector coverage

The publication covers the claimants on the ETMP at the time of data extraction. Data is extracted 5 days after the Employer Payment Summary deadline. This means that any late submissions which arrive later than 5 days after the deadline are not included in the data.

A small number of employers are also removed by Special Customer Records (SCR).

2.4 Statistical concepts and definitions

Employment Allowance

The Employment Allowance came into effect in April 2014 and provides eligible employers with a reduction in their employer NICs liabilities.

Eligible employers

Initially, the allowance was available to business, charities and amateur sports clubs.

As of April 2015, domestic employers of care and support workers are also eligible to claim the allowance.

As of April 2016, limited companies where the director is the only employee with paid earnings above the Secondary Threshold for NICs are no longer able to claim the allowance. Other domestic employers and public sector employers where at least 50% of their work is of a public nature are not eligible for the allowance.

As of April 2020, the allowance was targeted to employers with an employer NICs liability below £100,000 in the previous tax year.

Allowance amounts

When the allowance was first introduced in 2014, the maximum allowance was £2,000.

In April 2016, the maximum allowance rose to £3,000.

As of April 2020, the value of the maximum allowance was increased to £4,000.

Financial year

The statistics are aggregated into financial years. A financial year stretches from 1st April until 31st March the following calendar year.

Number of employers

The number of employers benefitting from the Employment Allowance is taken from HMRC’s Enterprise Tax Management Platform data. An employer is defined as benefitting if they have had an amount of the allowance offset against their employer NICs liabilities.

2.5 Statistical unit

The unit in the statistics is employers and other entities who claimed the employment allowance.

2.6 Statistical population

All employers who can claim the employment allowance. This includes UK limited companies; any foreign company with a UK branch or office; and clubs, co-operatives or other unincorporated associations, e.g. community groups or sports clubs.

2.7 Reference area

The geographic region covered by the data is the United Kingdom (UK).

2.8 Time coverage

The statistics cover the period from tax year 2014 to 2015 until the latest tax year for which employment allowance data is available. The publication covers the most recent years, with more detailed breakdowns becoming available from tax year 2018 to 2019. Information on data from previous years can be found in prior publications.

3. Statistical processing

3.1 Source data

The Employment Allowance can be claimed through an employer’s payroll system which is then processed through HMRC’s Pay As You Earn (PAYE) Real Time Information (RTI) system. An employer can claim their eligibility by submitting an Employer Payment Summary. When an employer then sends through their Full Payment Submissions when submitting their payroll, the allowance is offset against their employer NIC liabilities due on their employee(s).

3.2 Frequency of data collection

Data for this publication is collected for each pay period and aggregated by tax year.

3.3 Data collection

The number of employers benefitting from the Employment Allowance is taken from HMRC’s Enterprise Tax Management Platform data. An employer is defined as benefitting if they have had an amount of the allowance offset against their employer NICs liabilities.

3.4 Data validation

Checks carried out on the data include:

• Automated checks take place when loading data into the analysis database. Inconsistencies are automatically ‘repaired’ if possible; otherwise the record is flagged as invalid.
• Analysts check that the number of records loaded into the analysis database is as expected.
• The analysis code checks for duplicates within the ETMP and BLT data and removes them.
• Figures are checked for consistency across previous publications, and policy changes.

3.5 Data compilation

Apportioning missing data

For employers who are missing information about sector, employer size, region or constituency, the number of employers is apportioned across the sectors, employer sizes, regions, or constituencies.

Aggregating data

Data are aggregated using a unique taxpayer reference number assigned to each employer. This unique number is the same across tax years.

4. Quality Management

4.1 Quality assurance

All official statistics produced by KAI, must meet the standards in the Code of Practice for Statistics produced by the UK Statistics Authority and all analysts adhere to best practice as set out in the ‘Quality’ pillar.

Analytical Quality Assurance describes the arrangements and procedures put in place to ensure analytical outputs are error free and fit-for-purpose. It is an essential part of KAI’s way of working as the complexity of our work and the speed at which we are asked to provide advice means there is a high risk of error which can have serious consequences on KAI’s and HMRC’s reputation, decisions, and in turn on peoples’ lives.

Every piece of analysis is unique, and as a result there is no single quality assurance (QA) checklist that contains all the QA tasks needed for every project. Nonetheless, analysts in HMRC use a checklist that summarises the key QA tasks, and is used as a starting point for teams when they are considering what QA actions to undertake.

Teams amend and adapt it as they see fit, to take account of the level of risk associated with their analysis, and the different QA tasks that are relevant to the work.

At the start of a project, during the planning stage, analysts and managers make a risk-based decision on what level of QA is required.

Analysts and managers construct a plan for all the QA tasks that will need to be completed, along with documentation on how each of those tasks are to be carried out and turn this list into a QA checklist specific to the project.

Analysts carry out the QA tasks, update the checklist, and pass onto the Senior Responsible Officer for review and eventual sign off.

4.2 Quality assessment

The QA for this project adhered to the framework described in ‘4.1 Quality assurance’ and the specific procedures undertaken were as follows:

Stage 1 – Specifying the question

Analysts and stakeholders agreed on whether any changes beyond data updates are required from previous publications.

Stage 2 – Developing the methodology

The methodology was agreed and developed in collaboration with stakeholders and others with relevant expertise, ensuring it was fit for purpose and would deliver the required outputs.

Stage 3 – Building and populating a model/piece of code

• Analysis was produced using the most appropriate software and in line with good practice guidance.
• Data inputs were checked to ensure they were fit-for-purpose by reviewing available documentation and, where possible, through direct contact with data suppliers.
• QA of the input data was carried out.
• The analysis was audited by someone other than the lead analyst – checking code and methodology.

Stage 4 – Running and testing the model/code

• Results were compared with those produced in previous years and differences understood and determined to be genuine.
• Results were compared with comparable independent estimates, and differences understood.
• Results were determined to be explainable and in line with expectations.
• Results have been compared with those produced by an alternative model.

Stage 5 – Drafting the final output

• Checks were completed to ensure internal consistency (e.g. totals equal the sum of the components).
• The final outputs were independently proofread and checked.

5. Relevance

5.1 User needs

This analysis is likely to be of interest to users under the following broad headings:

• National government – policy makers and MPs
• Regional and local governments
• Academia and research bodies
• Media
• Business community
• General public

5.2 User satisfaction

Formal investigations into user satisfaction have not been undertaken, however feedback from users following the release have been received and HMRC are always open to ideas for new analysis to meet changing user requirements.

5.3 Completeness

This publication uses a snapshot of data taken 5 days after the end of the tax year and this figure is not retrospectively revised. However, claims can be made retrospectively for up to 4 years and there are some employers who miss the deadline for submission. Therefore, statistics contained in this report cannot be considered as complete; however, we believe that the number of retrospective claims is relatively small.

6. Accuracy and reliability

6.1 Overall accuracy

This analysis is based on administrative data, and accuracy is addressed by eliminating non-sampling errors as much as possible through adherence to the quality assurance framework.

The potential sources of error include:

• Employers entering incorrect information onto HMRC’s Basic PAYE tools or other payroll software.
• Human or software error when entering data into the PAYE system.
• Employers not completing their Employer Payment Summary (EPS) form via PAYE by the required date.
• The accuracy and consistency of the assignment of SIC 2007 and the Summary Trade Classification (STC) codes, when classifying companies by industry sector.
• Sums of sector/location/employer size may not sum to the total due to rounding and negligible numbers of employers falling into smaller sectors or locations.
• Mistakes in the programming code used to analyse the data and produce the statistics.

6.2 Sampling error

Samples are not used to compile the analysis, instead analysis is based on administrative data from HMRC’s PAYE system. Sampling error is therefore not relevant.

6.3 Non-sampling error

Coverage error

All qualifying businesses must register with HMRC and select ‘Yes’ in the Employment Allowance indicator and submit an EPS. Coverage error is therefore not relevant.

Measurement error

The main sources of measurement error could be categorised as respondent errors and include the following:

• Employers may make errors entering their information onto the PAYE system or EPS form.
• Employer PAYE data is subsequently combined with Business Lookup Table (BLT) data, which is another point at which data may be altered due to human or software error. There is also a possibility for match rate differences between the datasets.

There is a risk of duplicates in the ETMP data that may distort the overall statistics. To mitigate against this, checks are conducted on the analysis database before the statistics are produced, and any duplicates are removed.

In addition, companies are classified by industrial sector using the SIC 2007 standard and the Summary Trade Classification (STC) codes. The quality of the statistics is limited by the accuracy and consistency with which these codes have been assigned. To deal with known issues, some adjustments and corrections are made before the statistics are produced.

Nonresponse error

When analysing Employment Allowance numbers for the latest available year, figures are not necessarily available for all employers, as some may not have completed their EPS by the required date.

Employers who miss the deadline for submitting their EPS in one year may be included in reports for future years. Existing publications are not updated retrospectively, and no adjustment is made if they have not made a claim in one year.

Processing error

It is possible that errors exist in the programming code used to analyse the data and produce the statistics. This risk is reduced through developing a good understanding of the Employment Allowance, and thoroughly reviewing and testing the programs that are used via data validation and QA

6.4 Data revision

Data revision – policy

The United Kingdom Statistics Authority (UKSA) Code of Practice for Official Statistics requires all producers of Official Statistics to publish transparent guidance on the policy for revisions.

Data revision – practice

This analysis is published annually and as claims can be made retrospectively from up to 4 years ago, there is an analytical perspective to not update previous claims as for publication a snapshot is taken 5 days after the end of the tax year and this figure is not retrospectively revised.

6.5 Seasonal adjustment

Seasonal adjustment is not applicable for this analysis.

7. Timeliness and punctuality

7.1 Timeliness

This publication covers reports on the employers who have claimed the employment allowance for the 2020 to 2021 tax-year. The data is extracted 5 working days after the Employer Payment Summary deadline on the 19th to remain consistent with the previous iterations of this publication. This means that any claimants more than 5 working days after the deadline will not be included in the publication.

7.2 Punctuality

In accordance with the Code of Practice for official statistics, the exact date of publication will be given not less than one calendar month before publication on both the Schedule of updates for HMRC’s statistics and the Research and statistics calendar of GOV.UK.

Any delays to the publication date will be announced on the HMRC National Statistics website.

The full publication calendar can be found on both the Schedule of updates for HMRC’s statistics and the Research and statistics calendar of GOV.UK.

8. Coherence and comparability

8.1 Geographical comparability

This analysis is presented for a single region – the United Kingdom.

8.2 Comparability over time

The overview table displays the overall amount of claimants for the 6 previous years. Additional tables provide figures for the 2 previous years.

The policy design of the Employment Allowance has changed since its introduction, which has an impact on the number of employers who are eligible. These changes are explained in the publication.

8.3 Coherence – cross domain

It is only HMRC who produce statistics based on Employment Allowance data. Different data sources (ETMP and BLT) are used to generate the Employment Allowance dataset. These are combined so that office numbers and scheme references can be matched to IDBRs.

Coherence – sub-annual and annual statistics

All statistics are presented as annual outputs. No coherence issues exist.

Coherence – national accounts

These coherence issues are not applicable to this release.

8.4 Coherence – internal

Rounding of numbers may cause some minor internal coherence issues as the figures within a table may not sum to the total displayed. Effort has been made to ensure totals between tables remain constant where appropriate.

9. Accessibility and clarity

9.1 News release

There haven’t been any press releases linked to this data over the past year.

9.2 Publication

The tables and associated commentary are published on the Employment Allowance take-up statistics webpage of GOV.UK.

Tables are published in the OpenDocument format, and the associated commentary as an accessible HTML.

Both documents comply with the accessibility regulations set out in the Public Sector Bodies (Websites and Mobile Applications) (No. 2) Accessibility Regulations 2018.

Further information can be found in HMRC’s accessible documents policy.

9.3 Online databases

This analysis is not used in any online databases.

9.4 Micro-data access

Access to this data is not possible in micro-data form, due to HMRC’s responsibilities around maintaining confidentiality of taxpayer information.

9.5 Other

There aren’t any other dissemination formats available for this analysis.

9.6 Documentation on methodology

The methodology is explained in the publication.

9.7 Quality documentation

All official statistics produced by HMRC, must meet the standards in the Code of Practice for Statistics produced by the UK Statistics Authority and all analysts adhere to best practice as set out in the ‘Quality’ pillar.

Information about quality procedures for this analysis can be found in section 4 of this document.

10. Cost and burden

Because all necessary data for the Employment Allowance Statistics is obtained from an administrative data source, i.e. ETMP, RTI, there is no additional burden on employers or HMRC tax inspectors to provide information.

It is estimated to take about 30 days FTE to produce the annual analysis and publication.

11. Confidentiality

11.1 Confidentiality – policy

HMRC has a legal duty to maintain the confidentiality of taxpayer information.

Section 18(1) of the Commissioners for Revenue and Customs Act 2005 (CRCA) sets out our duty of confidentiality.

This analysis complies with this requirement.

11.2 Confidentiality – data treatment

The statistics in these tables are presented at an aggregate level so identification of individual employers is minimised, but potentially still possible. Aggregate data categorised by SIC 2007 code, has the potential to be disclosive.

Where potential risks exist, statistical disclosure control (SDC) is applied to cells within tables. SDC is the application of methods to ensure confidential data is not disclosed to parties who don’t have authority to access it.

SDC modifies data so that the risk of data subjects being identified is within acceptable limits while making the data as useful as possible.

Disclosure in this analysis is avoided by applying rules that prevent categories of data containing:

• small numbers of contributors, and
• small numbers of contributors that are very dominant

If a cell within a table is determined to be disclosive, its contents are suppressed either by removing the data or combining categories.

Further information on anonymisation and data confidentiality best practice can be found on the Government Statistical Service’s website.