CJRS and Employment Allowance

How Does the Employment Allowance effect the claim under the CJRS

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Does anyone know how the Employment allowance will effect the Claim for Employers NIC Grant through the CJRS

I would assume that if your annual ER's NIC is under £4,000 then you will not be able to receive a grant for this under CJRS as you do not incur the cost,

However if your ERs' NIC liability is for April is £2,000 through using the CJRS, can you still claim this in the Grant as again this would have been covered by the Employment allowance, 

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By Duggimon
14th Apr 2020 12:02

The grant will be based upon historical data and not what you submit now. I'm not sure how the grant will account for employment allowance claims but it makes no difference to what you file on your payroll now.

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By lionofludesch
14th Apr 2020 12:08

I came to the opposite conclusion that you can claim the Employer's NI cost as Employment Allowance is not Employer's NIC.

There are however, three or four different scenarios.

1. Employment Allowance covers all NI cost during the year.

2. Employment Allowance does not cover NI cost, even after furloughing.

3. Employment Allowance covers all the non-furloughed NI and part of the furloughed NI.

4. Any other scenario I've not thought of.

I'm not sure Moneysoft can cope with all this, even if we knew the rules.

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Replying to lionofludesch:
By Duggimon
14th Apr 2020 12:28

Am I being dense? Why does it matter?

Employee salaried at £2500 per month in February is furloughed on 80% wages is paid £2,000 from 1 March. £2,000 is claimed from the government to cover this. E'er NI on £2000 is paid to business as part of the grant. Payroll for March is filed with employee paid £2,000, plus applicable E'er NI.

Why does it matter whether there is employment allowance claimed to cover the E'er NI on the £2,000 actually paid? The grant is unchanged, the claim for the CJRS is (probably) unchanged.

It might be a more pertinent question if it was about how the claim process for the CJRS grant takes EA into account, but that isn't the question, the question is about how it affects April PAYE filings and the answer, so far as I can see, is that it's business as usual in that regard.

If you were asking me to guess about the grant, I would guess that it ignores EA entirely because anything else will be horribly complicated.

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By lionofludesch
14th Apr 2020 13:09

Duggimon wrote:

Am I being dense? Why does it matter?

In Month 1, it doesn't.

Later on, it might.

Depends how long it lasts.

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By Ruth75
14th Apr 2020 12:56

I would like clarification on this too. I run payrolls for small family businesses and the Employer NI is mostly covered by the Employer's allowance in a tax year.

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By Springfield
20th Apr 2020 12:18

Can I respond to what I think the original question is getting at?

The latest (17th April) HMRC guidance contains this statement.

"The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions you are due to pay."

So, you can only claim for the Employers NI element that is payable in that month.

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By Yatey
20th Apr 2020 20:25

I’m also going round in circles a little on this one, and I apologise if it is obvious to everyone else.

If the employers NIC liability is £2,000 for April 2020 and the employment allowance is claimed at the start of the tax year, then wouldn’t the £4,000 EA wipe out all of the Eers NIC due for April and May, meaning that no claim could be made for employers NIC in those periods as part of the CRS grant claim?

Would it be better not to make the claim for the Employment Allowance at the start of the tax year and perhaps wait until June (or whenever the periods of furlough have ended) so that the benefit of the Employers Allowance can be received in a period when the business is actually having to make the payment of the Employers NICs?

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By lionofludesch
20th Apr 2020 20:41

Yatey wrote:

I’m also going round in circles a little on this one, and I apologise if it is obvious to everyone else.

If the employers NIC liability is £2,000 for April 2020 and the employment allowance is claimed at the start of the tax year, then wouldn’t the £4,000 EA wipe out all of the Eers NIC due for April and May, meaning that no claim could be made for employers NIC in those periods as part of the CRS grant claim?

Would it be better not to make the claim for the Employment Allowance at the start of the tax year and perhaps wait until June (or whenever the periods of furlough have ended) so that the benefit of the Employers Allowance can be received in a period when the business is actually having to make the payment of the Employers NICs?

That's the crux of the debate we've been having for the last week.

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By Mallock
22nd Apr 2020 15:51

The Employment Allowance guidance states "You can claim at any time in the tax year, but the earlier you claim the sooner you will get the allowance"
This was obviously written per CJRS but there is nothing to state that you can't defer the claim for EA and from a client's perspective it is clearly beneficial to recover er's NI just now through the CJRS scheme and retain the full £4,000 to claim against er's NI later in the year after CJRS has finished.
I am normally very careful not to do anything that could even be construed to be borderline but I am equally conscious that if we process payroll and tick the box to claim EA from Month 1, some clients, after a chat down the pub with their mates, may be very upset if they find they have lost some of the benefit of EA unnecessarily.
I have scoured everything I can, have phoned Croner and Markel Tax and haven't been able to get any clarity apart from the fact that the EA guidance says you can claim it at any time and the CJRS only mentions that IF you claim EA you have to deduct it from the er's NI before making your claim under the furlough scheme.

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Replying to Mallock:
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By coldhold
25th Apr 2020 11:07

Mallock wrote:

The Employment Allowance guidance states "You can claim at any time in the tax year, but the earlier you claim the sooner you will get the allowance"
This was obviously written per CJRS but there is nothing to state that you can't defer the claim for EA and from a client's perspective it is clearly beneficial to recover er's NI just now through the CJRS scheme and retain the full £4,000 to claim against er's NI later in the year after CJRS has finished.
I am normally very careful not to do anything that could even be construed to be borderline but I am equally conscious that if we process payroll and tick the box to claim EA from Month 1, some clients, after a chat down the pub with their mates, may be very upset if they find they have lost some of the benefit of EA unnecessarily.
I have scoured everything I can, have phoned Croner and Markel Tax and haven't been able to get any clarity apart from the fact that the EA guidance says you can claim it at any time and the CJRS only mentions that IF you claim EA you have to deduct it from the er's NI before making your claim under the furlough scheme.

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By coldhold
25th Apr 2020 11:13

Has anybody managed to get a definitive response from HMRC on whether EA can be deferred until later in the tax year? My 48 hour call back from HMRC has not materialised.

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By Wanderer
25th Apr 2020 11:20

You will NOT get a definitive response from an HMRC call back, it will likely vary depending on who you are talking to.
I'm going with the (current) ICAEW Tax Faculty advice and, in appropriate cases, deferring the EA claim until late in the year.

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By Mallock
22nd Apr 2020 16:06

The HMRC guidance on Employment Allowance states "You can claim at any time in the tax year, but the earlier you claim the sooner you will get the allowance". This was obviously written pre CJRS but it is clear that you do not need to make a claim from month 1.
The only reference in the CJRS to the EA states that you must deduct any EA claimed from Er's NI before making a claim under the CJRS but it infers that only applies if you have made a claim for EA.
Some employers who only have a small number on furlough may still wish to claim EA but others with high numbers on furlough may not.
I never get into controversial areas if I can help it and always err on the side of caution but it appears to me that we could be subject to potential claims for negligence if we don't defer the claim for EA for employers who have large numbers on CJRS when we do the payroll.
I have read everything I can get my hands on and have called Markel Tax and Croner and nothing has convinced me that we can't defer claiming EA.

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By PayPro
23rd Apr 2020 12:48

The Tax Faculty has now updated it's guidance here https://www.icaew.com/insights/tax-news/2020/apr-2020/cjrs-emerging-issu...

The Tax Faculty suggests that it may be simpler not to claim employment allowance until later in the tax year. All claims for employment allowance had to be reset in April. This avoids the need to adjust the grant for employment allowance.

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Replying to Mallock:
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By Wanderer
23rd Apr 2020 12:55

Mallock I'm completely with you.
In addition to what you have done I read the original law relating to the Employment Allowance (referenced in a previous post) and came to the ultimate conclusion that agreed with yours.

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By lionofludesch
23rd Apr 2020 13:20

Wanderer wrote:

Mallock I'm completely with you.
In addition to what you have done I read the original law relating to the Employment Allowance (referenced in a previous post) and came to the ultimate conclusion that agreed with yours.

This has not properly been addressed in the CJRS legislation. Imho, it would have been much better if everyone were able to claim their Class 1 contributions without taking account of EA.

I'm still not comfortable with delaying EA for folk who won't ever get anywhere nearf £4000 of secondary NI.

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By Mallock
23rd Apr 2020 13:38

lionofludesch I agree with you on those who would not use the full EA and we have just claimed EA from month 1 for those that we know won't get close to it. We are also getting agreement from clients on whether to defer EA.
Some clients maybe only have 25% of the workforce on furlough and the cashflow advantage of not paying er's NI on the remaining 75% outweighs to potential loss long term.
There is a lot of work in getting the most effective solution in every case but hopefully clients will appreciate it in the long term.

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By lionofludesch
23rd Apr 2020 13:49

Mallock wrote:

lionofludesch I agree with you on those who would not use the full EA and we have just claimed EA from month 1 for those that we know won't get close to it.

The thing is, Mallock, if this delaying EA works for the big £4000+ boys, it works for the small ones too, who can effectively turn their EA into cash.

It's probably fine - but I'm not comfortable with it, that's all.

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By PayPro
23rd Apr 2020 14:54

lionofludesch, I don’t quite follow your methodology. There is no doubt that any NI received as part of the JRS grant will be paid back to HMRC within the monthly PAYE payment so effectively netting it off. There is no free cash. The benefit (or loss if it is claimed now) is the value of that NI which otherwise would have come out of the £4,000 EA. If an employer does not have annual secondary NI of at least £4K there is no ultimate benefit to them either way and they may as well claim the EA in April.

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By lionofludesch
23rd Apr 2020 15:14

Claim is for £2000 + £100 NI.

With EA, repaid £2000

Delays EA, repaid £2100. When they eventually claim EA, they get a £100 credit to use against PAYE or primary NI.

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By Mallock
23rd Apr 2020 15:24

Remember that to get the £100 NI back in the CJRS claim, you have to pay HMRC the £100 NI in the first place so it makes no difference for those who claim less than the EA maximum of £4,000

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By lionofludesch
23rd Apr 2020 15:39

Mallock wrote:

Remember that to get the £100 NI back in the CJRS claim, you have to pay HMRC the £100 NI in the first place so it makes no difference for those who claim less than the EA maximum of £4,000

Yes - pay out £2100, get £2100 back.

Still get £100 credit later.

So £100 better off.

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By Mallock
23rd Apr 2020 15:58

No, all that happens is that you have £100 less of an allowance that you can't use because your er's NI total for the year is less than £4,000. You can't carry unused relief forward so it's lost and it makes no difference if you lose £1,500 of an allowance or £1,600 of an allowance if you can't use it.

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By Paul Hawes
23rd Apr 2020 16:07

Lion is talking about the fact if you claim EA part way through the year, if you have leftover allowance from the £4k you can offset the balance on ER NI liabilities due prior to making the claim against other taxes.

Say your liability is £1,200 for the year but you delay EA claim and only claim £1,000. You would still be able to offset £200 against other taxes at the end of the tax year.

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Replying to lionofludesch:
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By Paul Hawes
23rd Apr 2020 16:04

I see the point you're making, but I imagine if you are trying to claim the £100 credit later that it would fall under the category of NI expense that you didn't incur and so you would have to pay HMRC back for the £100 you claimed through furlough. Who knows though.

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By lionofludesch
23rd Apr 2020 16:12

Paul Hawes wrote:
Who knows though.

Indeed.

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By PayPro
23rd Apr 2020 19:19

lionofludesch wrote:

Mallock wrote:

Remember that to get the £100 NI back in the CJRS claim, you have to pay HMRC the £100 NI in the first place so it makes no difference for those who claim less than the EA maximum of £4,000

Yes - pay out £2100, get £2100 back.

Still get £100 credit later.

So £100 better off.

But that is not how it plays out in practice. For your example to become reality, the employer would need to ask HMRC for the £100 credit which they are not entitled to because they have not incurred the £100 NI expense due to the JRS grant.

In the rare event that HMRC themselves issue the credit, more fool them for not realising that the NI they are giving credit for was covered by the JRS grant.

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By lionofludesch
23rd Apr 2020 20:13

PayPro wrote:

lionofludesch wrote:

Mallock wrote:

Remember that to get the £100 NI back in the CJRS claim, you have to pay HMRC the £100 NI in the first place so it makes no difference for those who claim less than the EA maximum of £4,000

Yes - pay out £2100, get £2100 back.

Still get £100 credit later.

So £100 better off.

But that is not how it plays out in practice. For your example to become reality, the employer would need to ask HMRC for the £100 credit which they are not entitled to because they have not incurred the £100 NI expense due to the JRS grant.

I don't agree with your thought process.

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By paulwakefield1
15th Jun 2020 12:07

Thread resurrection time:

Having read the opaque HMRC Guidance: https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-c...

as published on Friday several times and the rather more helpful although not entirely unambiguous ICAEW guidance:

"It is possible to delay claiming employment allowance until later in the tax year when CJRS grants are no longer being claimed. The employment allowance legislation does not require an immediate claim and allows claims to be backdated four years. The CJRS guidance requires the grant to be reduced by the employment allowance but only where it has been claimed. The Tax Faculty put this scenario to HMRC and it has confirmed that it does not take exception to this approach so long as where employment allowance has been claimed, the CJRS grant is reduced accordingly. "

I have come to the conclusion that you can definitely defer the EA claim until after the end of CJRS and use it against subsequent Employers NI assuming sufficient NI arising to cover the allowance. I have not bothered to get my head around the interaction where some employees are not furloughed and some are whilst the scheme is in existence as fortunately I don't need to.

Anybody disagree?

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Replying to paulwakefield1:
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By Matrix
15th Jun 2020 12:18

Keep a copy since the ICAEW guidance keeps changing and advise clients accordingly.

Due to the uncertainty all my clients’ EA claims were made in April, I had to make a decision based on the advice at the time.

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By paulwakefield1
15th Jun 2020 12:38

Wise advice.

Fortunately I have been telling clients to hold fire and that nothing is yet certain.

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