All of EA is credited to month 5 and exceeds E NIC

£4000 EA is credited against the month 5 PAYE payments on Paye Online but Emp NIC is much less

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I applied for EA on 15th August for month 5. On PAYE Online for employers website it is shown as EA for month 4 instead of month 5. All of £4000 is credited to Month 5 although the employer nic in month 5 is only £1418.29. 

I cannot understand why it is shown as EA for month 4 when we applied in month 5. We did not use any EA in month 4.

Also, why is all of it credited to month 5 when the employer NIC is much less.

I am not sure how much PAYE to pay now. Do I pay what is shown on website (which is deducting £4000 from the payment) or do I pay after deducting £1418.29 from the payment).

 

Replies (23)

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By Paul Crowley
15th Sep 2020 14:54

Similar threads exist
All PAYE software seem to get it wrong

Search any answers 'employment allowance'

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By Wanderer
15th Sep 2020 15:00

Oki1970 wrote:

I cannot understand why it is shown as EA for month 4 when we applied in month 5. We did not use any EA in month 4.

Because you filed the EPS on 15 August which is within the EPS period for month 4.
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Replying to Wanderer:
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By Oki1970
15th Sep 2020 15:20

Thanks for your help. I understand.

Does it mean it will be deemed to be claimed in month 4? We did not use EA in month 4. The reason I am asking is we claimed a small amount of Emp NI in month 4 under CRJ scheme.

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Replying to Oki1970:
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By SXGuy
15th Sep 2020 17:07

Then you've prob got an over claim in the cjrs payment and possibly will need to adjust for whatever employer ni you did pay in month 4.

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Replying to Oki1970:
RLI
By lionofludesch
15th Sep 2020 21:57

Oki1970 wrote:

Thanks for your help. I understand.

Does it mean it will be deemed to be claimed in month 4?

Yes. Why did you not wait until 6th September?

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By lionofludesch
15th Sep 2020 17:57

You can't expect software to be amended for what will undoubtedly be one year.

Nor can the employer be responsible for defects in HMRC software.

Just make sure you pay what you owe. In full.

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Replying to lionofludesch:
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By Oki1970
15th Sep 2020 19:05

lionofludesch wrote:

You can't expect software to be amended for what will undoubtedly be one year.

Nor can the employer be responsible for defects in HMRC software.

Just make sure you pay what you owe. In full.

When you say pay what you owe in full, do you mean not use the EA in month 5 and subsequent months? In other words don't use the £4000 made available and showing on HMRC website at all?

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Replying to Oki1970:
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By lionofludesch
15th Sep 2020 19:39

Quote:

When you say pay what you owe in full, do you mean not use the EA in month 5 and subsequent months? In other words don't use the £4000 made available and showing on HMRC website at all?

You may as well not claim EA at all if you're going to do that.

No, work out what you owe for month 5, taking credit for such part of the EA as you deem appropriate. Pay that. Don't listen to your software.

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By Paul Crowley
16th Sep 2020 03:55

Agree Lion
It is back to pen and paper.
No idea how HMRC will reconcile

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Replying to Paul Crowley:
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By lionofludesch
16th Sep 2020 07:22

Paul Crowley wrote:

Agree Lion
It is back to pen and paper.
No idea how HMRC will reconcile

It's not rocket science.

Luckily for me, I only have three cases where they pay more than £4000 in NI a year. All of them will use up their EA by month 6. The difficult ones will be where they pay less than £4000 between months 5 and 12. Presumably they'll need to repay some CJRS. But they won't be able to quantify the debt until next April. Which is six months after the "amnesty" expires.

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Replying to lionofludesch:
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By Oki1970
16th Sep 2020 21:19

lionofludesch wrote:

Paul Crowley wrote:

Agree Lion
It is back to pen and paper.
No idea how HMRC will reconcile

It's not rocket science.

Luckily for me, I only have three cases where they pay more than £4000 in NI a year. All of them will use up their EA by month 6. The difficult ones will be where they pay less than £4000 between months 5 and 12. Presumably they'll need to repay some CJRS. But they won't be able to quantify the debt until next April. Which is six months after the "amnesty" expires.

If they pay less than £4000 between months 5 and 12, why will they need to repay some CJRS? Surely, they will have unused EA which they can take forward to next year or use against other taxes? As long as they did not use any EA in month 1 to 4, and the CJRS calim for emp NI was not more than the actual emp NI paid in those months. Am I totally misunderstanding the whole thing?

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Replying to Oki1970:
RLI
By lionofludesch
16th Sep 2020 21:33

Oki1970 wrote:

lionofludesch wrote:

Paul Crowley wrote:

Agree Lion
It is back to pen and paper.
No idea how HMRC will reconcile

It's not rocket science.

Luckily for me, I only have three cases where they pay more than £4000 in NI a year. All of them will use up their EA by month 6. The difficult ones will be where they pay less than £4000 between months 5 and 12. Presumably they'll need to repay some CJRS. But they won't be able to quantify the debt until next April. Which is six months after the "amnesty" expires.

If they pay less than £4000 between months 5 and 12, why will they need to repay some CJRS? Surely, they will have unused EA which they can take forward to next year or use against other taxes? As long as they did not use any EA in month 1 to 4, and the CJRS calim for emp NI was not more than the actual emp NI paid in those months. Am I totally misunderstanding the whole thing?

Does that happen in a Covid-free year? EA not used against secondary NI is set against PAYE and primary NI?

I don't think so. Never come across it myself, anyway.

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Replying to Oki1970:
RLI
By lionofludesch
16th Sep 2020 23:20

Oki1970 wrote:

lionofludesch wrote:

Paul Crowley wrote:

Agree Lion
It is back to pen and paper.
No idea how HMRC will reconcile

It's not rocket science.

Luckily for me, I only have three cases where they pay more than £4000 in NI a year. All of them will use up their EA by month 6. The difficult ones will be where they pay less than £4000 between months 5 and 12. Presumably they'll need to repay some CJRS. But they won't be able to quantify the debt until next April. Which is six months after the "amnesty" expires.

If they pay less than £4000 between months 5 and 12, why will they need to repay some CJRS? Surely, they will have unused EA which they can take forward to next year or use against other taxes? As long as they did not use any EA in month 1 to 4, and the CJRS calim for emp NI was not more than the actual emp NI paid in those months. Am I totally misunderstanding the whole thing?

Let me put some numbers to that.

Suppose an employer had a secondary NI liability of £300 a month and claims it back under CJRS for the first four months. In month 5, he claims EA.

The HMRC computer will credit him with £1500 in month 5 and £300 a month for the next 7 months. So £3600 - plus the CJRS claims of £1200 = £4800. But he only had secondary NI of £3600. He's claimed £1200 twice.

The HMRC system can't cope with reducing his EA, so his only option is to repay CJRS money. He can't keep it to credit against some other tax liability as he'd still have claimed twice for the same money.

Imho, of course.

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Replying to lionofludesch:
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By Oki1970
17th Sep 2020 00:20

lionofludesch wrote:

Oki1970 wrote:

lionofludesch wrote:

Paul Crowley wrote:

Agree Lion
It is back to pen and paper.
No idea how HMRC will reconcile

It's not rocket science.

Luckily for me, I only have three cases where they pay more than £4000 in NI a year. All of them will use up their EA by month 6. The difficult ones will be where they pay less than £4000 between months 5 and 12. Presumably they'll need to repay some CJRS. But they won't be able to quantify the debt until next April. Which is six months after the "amnesty" expires.

If they pay less than £4000 between months 5 and 12, why will they need to repay some CJRS? Surely, they will have unused EA which they can take forward to next year or use against other taxes? As long as they did not use any EA in month 1 to 4, and the CJRS calim for emp NI was not more than the actual emp NI paid in those months. Am I totally misunderstanding the whole thing?

Let me put some numbers to that.

Suppose an employer had a secondary NI liability of £300 a month and claims it back under CJRS for the first four months. In month 5, he claims EA.

The HMRC computer will credit him with £1500 in month 5 and £300 a month for the next 7 months. So £3600 - plus the CJRS claims of £1200 = £4800. But he only had secondary NI of £3600. He's claimed £1200 twice.

The HMRC system can't cope with reducing his EA, so his only option is to repay CJRS money. He can't keep it to credit against some other tax liability as he'd still have claimed twice for the same money.

Imho, of course.

Thanks for the figures. It really makes it easier. When he applies for EA in month 5, HMRC computer will credit him £4000 and not £1500. He did not use any EA in month 1,2,3, and 4. Therefore, the CJRS claims in those months were not claimed twice. In the remaining 8 months he uses £2400 EA, and he is left with £1600 to carry forward to next year. This is in line HMRC rules, in my humble opinion. The whole thing is a mess anyway.

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Replying to Oki1970:
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By Wanderer
17th Sep 2020 03:20

Oki1970 wrote:

Thanks for the figures. It really makes it easier. When he applies for EA in month 5, HMRC computer will credit him £4000 and not £1500. He did not use any EA in month 1,2,3, and 4. Therefore, the CJRS claims in those months were not claimed twice. In the remaining 8 months he uses £2400 EA, and he is left with £1600 to carry forward to next year. This is in line HMRC rules, in my humble opinion. The whole thing is a mess anyway.

Nope, you have misinterpreted. The maximum EA claim is limited to the amount of ER NIC. In a non CJRS claim year this would be £3,600. In the example case you then have to limit that £3,600 by the amount claimed under CJRS, so £3,600 - £1,200 = £2,400. Nothing to carry forward.
HMRC computer never just credits £4,000, it always limits this to the ER NIC.
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Replying to Oki1970:
RLI
By lionofludesch
17th Sep 2020 05:05

Oki1970 wrote:

Thanks for the figures. It really makes it easier. When he applies for EA in month 5, HMRC computer will credit him £4000 and not £1500. He did not use any EA in month 1,2,3, and 4. Therefore, the CJRS claims in those months were not claimed twice. In the remaining 8 months he uses £2400 EA, and he is left with £1600 to carry forward to next year. This is in line HMRC rules, in my humble opinion. The whole thing is a mess anyway.

Agree with Wanderer.

They never credited max EA to small employers in the past and they won't now.

When have you ever carried forward EA to another year ?

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Replying to lionofludesch:
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By SXGuy
17th Sep 2020 06:44

Had this argument with someone recently. Wanted to know how they can journal EA carried forward as they don't use it each year. Wouldn't accept it isn't carried forward.

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Replying to SXGuy:
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By lionofludesch
17th Sep 2020 07:03

SXGuy wrote:

Had this argument with someone recently. Wanted to know how they can journal EA carried forward as they don't use it each year. Wouldn't accept it isn't carried forward.

Was it oki1970?

There must be thousands of one director companies with about £20000 of unused EA credit out there .......

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By Matrix
17th Sep 2020 06:33

In your example the £1,200 should never have been claimed under CJRS in the first place.

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Replying to Matrix:
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By lionofludesch
17th Sep 2020 07:00

Matrix wrote:

In your example the £1,200 should never have been claimed under CJRS in the first place.

Make it £400 a month then.

It's just an example.

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By Paul Crowley
17th Sep 2020 07:36

I may be wrong
BUT
I think the rules have changed.
The £4,000 is now state aid. Any unused can be set against other liabilities.

https://www.gov.uk/claim-employment-allowance/when-to-claim

'When to claim
You need to claim Employment Allowance every tax year.

You can claim at any time in the tax year, but the earlier you claim the sooner you will get the allowance.

If you claim late and do not use your Employment Allowance against your employers’ Class 1 National Insurance liabilities, you’ll have to ask HMRC to do one of the following:

use any unclaimed allowance at the end of the year to pay any tax or National Insurance you owe (including VAT and Corporation Tax if you do not owe anything on your PAYE bill)
give you a refund after the end of the tax year if you do not owe anything
You can see how much Employment Allowance you’ve used in your HMRC online account.'

This appears to say ever employer get £4,000 somehow

This reading is new to me
Does anyone know the true position?

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Replying to Paul Crowley:
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By Wanderer
17th Sep 2020 08:05

Paul Crowley wrote:

This appears to say ever employer get £4,000 somehow

This reading is new to me
Does anyone know the true position?

Refer back to the law which (last time I read) limits the allowance to the employer's NIC.
AIUI the 'unused' bit is anything that you haven't offset in the year (limited to the ER NIC), i.e late claims, back claims etc. Note that the quote you have given says "If you claim late".
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Replying to Paul Crowley:
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By Wanderer
17th Sep 2020 08:15

National Insurance Contributions Act 2014 wrote:
Employment allowance for national insurance contributions
(1)A person qualifies for an employment allowance for a tax year if, in the tax year—
(a)the person is the secondary contributor in relation to payments of earnings to, or for the benefit of, one or more employed earners, and
(b)in consequence, the person incurs liabilities to pay secondary Class 1 contributions,under SSCBA 1992 or SSCB(NI)A 1992 (or both).(2)The person's employment allowance for the tax year is—
(a)[F1£4,000], or
(b)if less, an amount equal to the total amount of the liabilities mentioned in subsection (1)(b) which are not excluded liabilities.
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