Employment Allowance and the CJRS

Good news and common sense has prevailed. HMRC have now confirmed that employers can save their Employment Allowance for later and use it after the CJRS grant has ceased to be available

There has been a huge amount of uncertainty, concern and discussion about how Employment Allowance (EA) is intended to interact with the Coronavirus Job Retention Scheme (CJRS).

Employers could claim EA on a month by month basis through the tax year and if they did, this would have reduced the ER Nic element that they could have included in a CJRS claim. It remains clear that if the EA covers all of an employer’s secondary class 1 NIC liability for the year, so that no secondary class 1 NIC is due for the year, then the employer should not claim for any employer’s NIC under the CJRS.

HMRC have now given a definitive answer:

Yes, an employer is allowed to wait and claim the EA later in the year and, if this approach is adopted, HMRC will not accuse the business of having claimed relief twice for the same employer’s NIC.

It is very important to make sure the EA is not set against employer’s NIC that has been claimed under the CJRS. Employers are allowed to claim the EA later in the tax year for liabilities up to a maximum of £4,000. However, they will need to take additional care to ensure that they do not receive relief for the same NIC liabilities twice.

We expect payroll software developers will now update their payroll software to facilitate this.