Should you not claim employment allowance yet?

Would it be better to leave EPS until later in the year

Didn't find your answer?

Interesting thought.  Using the example of a client with £4,000 employer NIC contributions a month.  For 19/20 they recevied their full employer allowance of £3,000 and furloughed their staff in March 2020 so get the employer NIC back through the grant claim for that month too.  So in effect receiving well over the employer allowance in relief in the year, and that all seems fine.

Rolling in to the next month being the 2020/21 year they are eligible to claim employer allowance of £4,000 but must put an EPS in at some stage to claim this, as it is no longer automatic.  If they do not put it in say for 3 months, then they could be suffering employer NIC on furloughed workers but get this back through the grant scheme.  Assuming the world returns to normal by June (unlikely), workers all come back on then employers NIC kicks back in as a cost as the grant scheme stops.  Query is, if they send their EPS to claim employer allowance at that stage, they arguably would have had all their employer NIC covered for employees on furlough and then get the £4,000 employer allowance in addition at that point in time.  But if claimed now my understanding is that you must use that up and not claim the employer NIC on the grnat claim.

As in the example of 19/20 year you can clearly get employer NIC covered by grant as well as the employment allowance in a year and think it strange why the rules would be different just because we are in a different month of the year.  I want to get it right for clients so they do not lose out and also so we dont get sued for using up the employment allowance instead of grant ie the order is very significant as they can lose out on £4,000. 

My head says however that the employment allowance should be used against the first £4,000 of employer NIC in the year - irrespective of when it is claimed.  It should therefore be allocated against April payroll, thus grant claims invaild for April, May etc until the total of £4,000 is reached.  Anyone else had thoughts on this?.....I am attending the HMRC webinar this afternoon but doubt this will be covered or answered.  Want to check we are all going to treat it the same way as it should not be a judgement call but cant find the answer in black and white.

Replies (16)

Please login or register to join the discussion.

avatar
By SXGuy
17th Apr 2020 07:56

You can defer claiming EA until after furlough ends and claim the Employers Ni through furlough.

What you can't do is claim EA in April and also claim employers ni while on furlough. So it's your choice. Yes it does appear like your getting an allowance twice, but that's just how it works. There will be people who can't claim EA at all. So they can't have different systems for each scenario.

Thanks (0)
Replying to SXGuy:
RLI
By lionofludesch
17th Apr 2020 09:55

SXGuy wrote:

You can defer claiming EA until after furlough ends and claim the Employers Ni through furlough.

What you can't do is claim EA in April and also claim employers ni while on furlough.

Is that definite ? Or just your interpretation of the half-baked statements we've been given ?

Clearly HMRC haven't thought this through.

There will be employers whose contributions for the year are always going to be less than £4000 and won't have any additional cost. At the other end of the scale, there are folk who'll be using their £4000 in month 1 and will have a cost, now or later. Then there'll be folk in between who genuinely won't know in April whether they will have a cost at all.

Thanks (1)
A Putey FACA
By Arthur Putey
17th Apr 2020 07:58

A good question. Morally, I would enable it now as it could be seen as taking an unfair advantage. But others might see it as good tax planning.

Thinking further, the CJRS claim is based on Feb earnings and related employer NI and pension. The amount actually paid to the employee in April and May might differ, usually because the employer is paying 100% of their salary and this may be more than the scheme limit. And how do you calculate the NI part of the claim anyway, is it the amount over the LEL? And how would you apportion the EA over a larger payroll which has an e/er NI liability of more than £4K in month 1 ........

Brightpay have added some furlough functionality but I haven't had the time to examine what it does,

Thanks (0)
RLI
By lionofludesch
17th Apr 2020 09:58

Here's another thought. For March, most employees will have some ordinary pay and some furlough pay.

Is the furlough pay the top slice of pay or the bottom slice ? Or should we take an average ? Or what ?

Thanks (0)
Replying to lionofludesch:
avatar
By jambokdl
17th Apr 2020 15:40

Good point which has yet to be answered - from seeing the phrase pro-rata on some guidance I am processing along those lines just now and will just have to make any adjustments if required when we eventually get guidance. ie splitting the NI and pension bandings between earned and furloughed pay on a pro-rata basis

Thanks (0)
blue sheep
By NH
17th Apr 2020 10:00

There is no answer on this as yet, but we are not claiming EA for clients in April or May and will be claiming back ERNI under the CJRS for those months.
Then we will be claiming EA in June.
The way I see it is that you have nothing to lose and everything to gain by doing it this way.

Thanks (1)
avatar
By Wanderer
17th Apr 2020 10:01

HMRC said this on Wednesday:-

HMRC wrote:
Audience Question:
Q: Is the employer national insurance contribution that is covered by the furlough scheme the full contribution or 80%?
A: We will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.
Hoping that the Employer's Allowance interaction will be covered when they issue this further guidance.
Thanks (0)
Replying to Wanderer:
avatar
By jambokdl
17th Apr 2020 15:36

The scheme goes live on Monday so love to know when they are planning to issue the extra guidance!!

Thanks (0)
avatar
By sumo69
20th Apr 2020 10:01

I have just completed a company claim for 9 of their 14 staff.
I claimed the Employers NI on the basis that over the course of the year will accumulate to around £40k from which the Employers allowance will be deducted.
It’s fair to assume the EA is set-off v non- furloughed employers NI in my opinion.

Thanks (0)
avatar
By Les Smith
20th Apr 2020 10:06

My payroll manager is of the belief that it is a yes or no question as to whether you want to claim EA and that notification has to be made to HMRC at the start of the year,
The simple answer is to include the Employers N.I. that you have received from HMRC in your subsequent PAYE payments which will mean you have only claimed EA on any salaries paid above the 80% and for smaller employers will have further EA to claim after the furlough period

Thanks (0)
avatar
By Cath Walker
20th Apr 2020 19:34

Just had a webchat with HMRC and they said: "I can confirm you can claim Employment Allowance at any time during the tax year.You can make a claim at any time during the tax year as long as your business or charity has employer Class 1 NICs liabilities and is eligible to claim the Employment Allowance. " I followed that up with the specific question if it was acceptable to not claim in April so we could claim the NI on the CJRS in April and they said yes.

Thanks (2)
avatar
By LucyCharles
22nd Apr 2020 10:23

As you cannot claim Employers Allowance without an HMRC check first, it is not being registered against your account immediately this year and you have to pay the Employers NI until your claim has been accepted.

When making the claim for the furlough grant it is stated very clearly that you cannot claim the NI if it will be reclaimed at a later date!

Thanks (0)
Replying to LucyCharles:
avatar
By Wanderer
22nd Apr 2020 10:47

LucyCharles wrote:

When making the claim for the furlough grant it is stated very clearly that you cannot claim the NI if it will be reclaimed at a later date!

But presumably that's JUST for EA claim against e.g. April ER NI?
Thanks (0)
Replying to Wanderer:
avatar
By LucyCharles
22nd Apr 2020 11:06

Surely even if it is claimed at a later date it is first offset against the earlier liabilities. So even if it's not claimed until the end of the year it will still be set against, April then May etc

Thanks (0)
Replying to LucyCharles:
RLI
By lionofludesch
22nd Apr 2020 11:15

LucyCharles wrote:

Surely even if it is claimed at a later date it is first offset against the earlier liabilities.

That's a huge assumption.

Thanks (0)
Replying to LucyCharles:
avatar
By Wanderer
22nd Apr 2020 11:18

Not on my reading of the law and guidance. I believe that if you have enough ER NIC in later months to offset it, then the claim is against that month without referencing back. (Yes I am aware of some other, apparently conflicting, guidance).

If, though, the later £4,000 claim for example extinguishes ALL ER NIC for the year then I believe that you shouldn't claim ER in the CJRS claim.

Thanks (0)