On 6 September 2010 the Government introduced a new regional national insurance contributions (NIC) holiday scheme for new business start ups in the UK outside London, the South East and East of England. Such business set ups will be eligible for a holiday worth up to £5,000 for up to the first ten employees they hire in their first year of business. It also applies to salary paid to company directors, shareholders and their relations.

This means a maximum saving on their NIC payments of up to £50,000. The scheme will run for three years and the Government estimate that 400,000 new businesses will benefit by having a lower tax bill from employing new staff. The NICs you are entitled to withhold under the scheme do not have to be repaid at a later date.

New businesses established since the announcement in the Emergency Budget on the 22nd June 2010, and which meet the qualifying criteria, will also be eligible to apply. The purpose of the NIC holiday scheme is to encourage the creation of private sector jobs in regions reliant on public sector employment by reducing the cost to new business of employing staff.

The types of business that may be able to apply for the holiday are:

• a sole trader, company or partnership that begins to carry on a trade, profession or vocation
• a property business or investment business
• a new trading charity whether or not it is carrying out activities with a view to profit
• However, Managed Service Companies do not qualify for the holiday

You can only apply for the NICs holiday if your principal place of business is located within designated areas of the UK at the time your business starts up. The included countries and regions are:

• Northern Ireland
• Scotland
• Wales
• East Midlands
• North East
• North West
• South West
• • West Midlands
• • Yorkshire and Humber

However, David Cameron made a statement last month saying he was disappointed at the poor response to this new initiative. This may be due to the recession or a lack of understanding of the criteria of eligibility. According to Government statistics, just 10,000 firms had taken advantage of the scheme at the halfway stage, when as mentioned above over the full term 400,000 were expected to sign up. HM Revenue & Customs have produced a guide to the operation of the scheme.