Further to requests for clarification, HMRC has confirmed that an employer’s Employment Allowance can be saved and used after the Coronavirus Job Retention Scheme (CJRS) is no longer available.
The Employment Allowance (EA) allows eligible employers to reduce their annual National Insurance liability by up to £4,000, paying less employers’ Class 1 National Insurance each time their payroll is run, until the £4,000 has gone, or the tax year ends (whichever is sooner).
The Tax Faculty of the Institute of Chartered Accountants in England and Wales has received a definitive response from HMRC about what happens in cases where the EA doesn’t cover all of an employer’s secondary class 1 National Insurance Contribution (NIC) liability for the year. The question has been whether the employer can pay secondary class 1 NICs for the beginning of the tax year April 2020 as usual, then reclaim under the CJRS rather than the EA. This would then conserve the EA until after the CJRS grant is no longer available.
The answer is that yes, the employer can wait and claim the EA later in the year.
Paul Newbold, partner at Torgersens, commented: ‘We welcome the clarification obtained by the ICAEW on this point but would caution employers to ensure that the Employment Allowance is not set against NIC that has already been claimed by them under the CJRS.’
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