State Aid was a sticking point in the Brexit agreement struck with the EU. Although some aspects have changed the UK broadly agreed to keep to EU rules about the maximum of State Aid the government can give a business. These are the EU de minimis State Aid regulations.

Employment Allowance* counts as State Aid and the letter is saying that HMRC assumes that receiving the Employment Allowance will not take you above the maximum allowed State Aid. You are being asked to tell them if it does and if so, withdraw your claim to the Allowance.

For most SMEs the limits to State Aid are large enough that we are very unlikely to get anywhere near the limits.

For more information and the limits themselves see HMRC’s Guidance.

*At time of writing, Employment Allowance waives the first £5k of Employers National Insurance due.