HMRC agrees Employment Allowance CJRS guidanceby
Just before the final claims under the CJRS are made, and long after employers were able to claim national insurance support, we have some welcome clarity on the interaction of the Employment Allowance and claiming employer NIC under the CJRS.
Accountants and payroll managers have been raising concerns for more than 18 months about the lack of clarity in the CJRS guidance around “double claims”. The problem arises where employers made claims for employer’s NI under the CJRS between 1 March 2020 and 31 July 2020, while also claiming Employment Allowance for the same tax months.
After protracted correspondence HMRC indicated to the Tax Faculty at ICAEW that:
- When an employer sets the marker to claim EA in their EPS this is classed as notification of a claim under s4(3) of NIC Act 2014, which also dictates that the EA relief takes precedence over any other support for employer NIC, such as via the CJRS; and
- Employer NIC should be claimed from the date of notification onwards for that tax year and should not be backdated to tax months prior to the date of claim as detailed in paragraph 10 of HMRC’s arrangements for EA support.
EA claim delayed until August 2020 or later
Given that employer NIC could not be claimed via Employment Allowance as well as under the CJRS, many employers and agents took the sensible decision to delay making a claim until employer NIC could no longer be claimed under the CJRS, meaning they made their EA claim in August 2020 or later.
This has now turned out to be a wise decision. HMRC’s view is that they could claim up to £4,000 employer NIC or the total of their employer NIC from that point until the end of the tax year (whichever figure is higher) and that would not be classed as a double claim.
However, many payroll software products backdate recovery of employer NIC to the start of the tax year regardless of when the claim is notified to HMRC as historically this has been what payroll software was required to do.
Some providers amended their software last year to stop this retrospection, and some employers reduced their EA claim manually to avoid double claiming for March-July 2020.
Where the amount claimed was not amended such that there was a “double” claim the NIC element of CJRS up to the value also claimed as EA must be repaid, as the EA claim takes priority and cannot be amended. HMRC’s guidance was incorrect on this point for some time during 2020, as guidance indicated that the employer helpline could facilitate reducing the EA figure submitted by the employer but has now been amended.
Any EA claimed in excess of that claimed under CJRS can stand.
EA claimed in April 2020 and under CJRS
Only EA should have been claimed from April–July 2020 as that would include all employer NIC relating to CJRS claims and potentially any additional employer NIC for non-furloughed employees up to the total of £4,000 available as EA.
Once the £4,000 EA had been claimed, any additional employer NIC relating to furloughed employees could be claimed under the CJRS until the end of July 2020. If up to £4,000 EA has been claimed as well as employer NIC under CJRS for the same tax months this is a double claim and the employer NIC claimed under CJRS must be repaid.
It’s disappointing that it has taken so long to get a definitive answer on the interaction of EA and CJRS. While £4,000 may seem an insignificant amount, for the small and micro-employers who can claim EA, it is a vital part of government support.