Employers claiming the Employment Allowance may have received double relief if also claiming Coronavirus Job Retention Scheme (CJRS) payments due to the pandemic. The ICAEW Tax Faculty has consulted with HMRC to provide clarification.
The Employment Allowance (EA) provides relief against employer's Class 1 National Insurance Contributions (NICs) up to £4,000. Businesses with less than £100,000 of employer's Class 1 NICs in the previous tax year are eligible.
CJRS claims paid for the period from March 2020 to July 2020 included an amount to cover the employer's Class 1 NICs.
If a business deferred the EA claim until after running the July payroll, HMRC do not believe that there's any danger of double claiming, provided:
- The employer Class 1 NIC liabilities arising from August 2020 until March 2021 were sufficient to absorb the whole £4,000 allowance.
- Businesses with liabilities of less than £4,000 will have had the unrelieved balance offset against liabilities incurred during the period April 2020 to July 2020. This, in turn, may lead to double claiming, as the EA takes priority over CJRS claims.
- Businesses that had the EA backdated and offset in the first quarter will need to check that the CJRS secondary NIC payments do not exceed the amount actually paid. Any excess claimed will need to be repaid.
If a business had claimed EA at the start of 2020/21:
- Secondary NICs were not being paid as they were absorbed by the EA.
- CJRS claims should not have included NICs that had not been paid.
- If such a claim was still made, the excess CJRS amount will need to be repaid.
Useful guides on this topic
The Employers' National Insurance Contributions (NICs) allowance is an allowance given to small and medium-sized employers to offset against their annual Employers' National Insurance liabilities.
National Insurance: Rates
Employee/Employer and Self-employed rates tables.
Covid-19: Coronavirus Job Retention Scheme (CJRS) to 31 October 2020
Coronavirus Job Retention Scheme (CJRS): a cash grant payable to employers up to 31 March 2021. This guide covers the scheme which ended on 31 October 2020.
COVID-19 zone: all about tax and financial support during the crisis