HMRC confirms interaction between the Employment Allowance and the CJRS

HM Revenue & Customs (HMRC) has confirmed that employers are permitted to save their Employment Allowance (EA) for later and use it after the Coronavirus Job Retention Scheme (CJRS) ceases to be available at the end of October 2020.

In response to a query from the Institute of Chartered Accountants in England and Wales’ (ICAEW) Tax Faculty, HMRC has revealed that employers are allowed to wait and claim the EA later in the year.

Since the CJRS was launched it was made clear that the EA covers all of the employer’s secondary Class 1 National Insurance Contributions (NIC) liability for the year, so that no secondary class 1 NIC is due for the year, meaning that employer should not claim for any employer’s NIC under the CJRS.

However, there has been growing confusion over what happens where the EA does not cover all of the employer’s secondary Class 1 NIC liability for the year and whether it is permissible for the employer to pay secondary Class 1 NIC for the first few months of the tax year starting in April 2020 in the usual way, and make a reclaim under the CJRS instead of using the EA.

Advice from HMRC, following the ICAEW’s request, has confirmed that employers should not worry about claiming relief for the same employer’s NIC twice, provided that for the time after the date when the EA claim is made there is at least £4,000 of secondary class 1 NIC payable.

Businesses should also make sure the EA is not set against employer’s NIC that has been claimed under the CJRS. It is allowable for employers to claim the EA later for liabilities which are under £4,000. However, they will need to take additional care to ensure that they do not receive relief for the same NIC liabilities twice.

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