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Employment Allowance / CJRS (since 12 June update)

Still not 100% clear?

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We were hoping that the 12th June updated guidance would clarify once and for all whether it was acceptable to delay claiming the employment allowance until later on in the tax year, and in the mean time claim the CJRS grant for Employers NIC.

https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-c...

The guidance released is above, which states:

"Employers who delay their Employment Allowance claim and have unused Employment Allowance available at the end of the tax year can use this to reduce other tax costs. Employers who have received a grant for employer NICs costs through the scheme should deduct the amount of grant they have received from the amount of Employment Allowance they have left before they use it, if not doing so would result in receiving relief for the same cost twice. Attempting to get relief for the same costs twice is a fraud and may result in claims being investigated."

Depending on how you read this, this seems to suggest that (only) employers who have unused employment allowance left at the end of the tax year need to deduct the amount of Ers NIC grant they have claimed through the CJRS before they use it (against other taxes).

Therefore is delaying the claiming of the employment allowance to later on in the tax year (to offset later Ers NIC costs) and claiming the Ers NIC CJRS grant in the mean time still ok? (assuming you are not left with unused employment allowance at the end of the tax year which you want to offset against other taxes).

Or are they really saying that you need to deduct the Ers NIC grant from the employment allowance you claim in all cases, including against Ers NIC later on in the tax year (for example if you claimed £3k in Ers NIC grant you'd then only have £1k employment allowance to use later on in the tax year?)

Either way, it is poorly written and they could have been more helpful here in clarifying this issue so would be interested to hear anyone else's thoughts on this point.

Thanks

Replies (15)

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By Wanderer
18th Jun 2020 17:19

ICAEW tax faculty state:-

ICAEW wrote:
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.
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By PandoraSleeps
18th Jun 2020 17:26

I think it's pretty clear now that you can't claim CJRS for your employer's NI at the start of the year and then claim your full EA later in the year and effectively get both. Although, we never did this anyway because we felt it wasn't ethical.

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Replying to PandoraSleeps:
RLI
By lionofludesch
18th Jun 2020 17:47

It depends. What about a situation where staff are furloughed, say, until June, the employer claims NIC rebate and then from July onwards, pays £10000 in employer's NI, from which a £4000 rebate is deducted ?

For me that's fine.

On the other hand, if the employer's NIC costs are always going to be covered by EA, furlough or not, I agree that no CJRS NI element should be claimed.

All but three of my claimants are in the second bracket and I've not claimed anything for NI. The other three I have claimed for and have not claimed EA - yet. Happy to change that if HMRC would say plainly what they mean (they've had several goes and it's still clear as mud).

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Replying to PandoraSleeps:
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By Wanderer
18th Jun 2020 17:47

Except you can when the total ER NIC will exceed the CJRS claim NIC + the EA claim.

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Replying to PandoraSleeps:
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By PandoraSleeps
18th Jun 2020 17:58

I respectfully disagree with the other comments.

HMRC's guidance says "Eligible employers can use the Employment Allowance to pay less employer NICs, until the allowance runs out or until the end of the tax year, whichever comes first. The Employment Allowance cannot be manually spread out over the tax year if it would otherwise be used up sooner."

I think this is unequivocal.

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Replying to PandoraSleeps:
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By Wanderer
18th Jun 2020 18:37

That's different though.

When I last read the legislation I concluded that you can only deduct the EA once you have claimed it and that there's nothing in the legislation to say that you have to claim it at the earliest opportunity and can't leave the claim until later in the year.

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Replying to Wanderer:
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By PandoraSleeps
18th Jun 2020 19:02

Isn’t that covered by the National Insurance Contributions Act 2014, section 4(4)(a)? This does say HMRC can require the allowance to be used at the earliest opportunity.

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Replying to PandoraSleeps:
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By Wanderer
18th Jun 2020 19:10

PandoraSleeps wrote:

Isn’t that covered by the National Insurance Contributions Act 2014, section 4(4)(a)? This does say HMRC can require the allowance to be used at the earliest opportunity.

Yes, deduct at earliest opportunity once it is claimed, however see 4(4)(d). No deduction until claimed.
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Replying to Wanderer:
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By PandoraSleeps
18th Jun 2020 19:35

I think we’ll have to agree to disagree! I’m off to have a glass of wine and some chilli.

Edited to say I don’t think (d) changes my interpretation. Yes HMRC won’t give you the deduction till you claim it, doesn’t mean they can’t still require you to offset it against April first under (a).

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Replying to PandoraSleeps:
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By Wanderer
18th Jun 2020 19:18

Your call, but the ICAEW tax faculty agrees with me, and they say HMRC agree as well. Enjoy the wine!

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Replying to PandoraSleeps:
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By Paul Crowley
18th Jun 2020 18:40

Not sure I agree.
Agree it can not be manually spread, but I interpret that to mean dividing £4000 by 12 to get an even balanced set of payments.
Employer can apply for EA at anytime in the year. From then it gets used in full against ERNIC until used up, even if that is only 2 months.

Third word in your quote is "can" not must

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Replying to Paul Crowley:
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By PandoraSleeps
18th Jun 2020 19:01

I don’t think this is what HMRC is referring to. The revised guidance is clearly in response to people not claiming EA so they can claim full CJRS AND EA later.

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Replying to PandoraSleeps:
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By tom123
18th Jun 2020 20:34

Is it conclusive that you cannot claim CJRS until October, and then offset EA against NI from November onwards?

I will have more than enough NI to do this.

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Replying to tom123:
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By PandoraSleeps
18th Jun 2020 20:55

Given the differences of opinion on this thread (in which I am in the minority) I would not treat that as conclusive, no.

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Replying to tom123:
RLI
By lionofludesch
18th Jun 2020 21:33

tom123 wrote:

Is it conclusive that you cannot claim CJRS until October, and then offset EA against NI from November onwards?

I will have more than enough NI to do this.

Well no. You can't claim NI after July so I reckon you're grand from month 5 onwards.

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