Employment Allowance and the CJRS

17 August 2020: HMRC confirms that employers can save their Employment Allowance for later and use it after the CJRS grant has ceased to be available

There has been considerable discussion about the Employment Allowance (EA) and how it interacts with the Coronavirus Job Retention Scheme (CJRS).

It has always been clear that if the EA covers all of the 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.

Where there has been confusion is what happens where the EA does not cover all of the employer’s secondary class 1 NIC liability for the year. Is it 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, thus saving the EA for later in the year after the CJRS grant has ceased to be available?

ICAEW’s Tax Faculty has asked several times for HMRC’s guidance to be made explicit on this point and received a definitive answer of yes. The employer is allowed to wait and claim the EA later in the year. There should be no 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. It is very important to 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 (late) 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.

The Tax Faculty understands that where necessary, software developers are modifying their payroll software accordingly.