[UK] The Employment Allowance 2020/21

One of the problems that members and readers have expressed to us through our Uniting Payroll app is what they should do when calculating the National Insurance reclaim grant under the Coronavirus Job Retention Scheme (CJRS).  The guidance says:

In calculating the total employer National Insurance contributions paid in any pay period, the employer should subtract any Employment Allowance used in that pay period. If you have not, or do not expect to pay any employer National Insurance contributions in a pay period as a result of the Employment Allowance, you should not claim any employer National Insurance contributions costs for furloughed employees in that pay period

Several users of the app have indicated that their software / payroll providers have not included this feature meaning that employers have to manually offset the allowance.  This increases complexity of an already complex calculation.

It has long been our view that employers can “work around” this by not claiming the Employment Allowance in the first place.  If there is no claim then there can be nothing to offset in the calculation.

So, we were pleased to see guidance from the Institute for Chartered Accountants in England and Wales (ICAEW) that said the same thing.  This was part of their “CJRS – emerging issues and answers” publication on their website.  Addressing this issue, their Tax Faculty wrote:

“The Tax Faculty suggests that it may be simpler not to claim employment allowance until later in the tax year. All claims for employment allowance had to be reset in April. This avoids the need to adjust the grant for employment allowance. 

Global Payroll Association Comment

There is nothing to say that the Employment Allowance has to be claimed at the start of the tax year, though we appreciate that this is what many employers do.  HMRC’s guidance explicitly says “you can claim at any time in the tax year”.

The HMRC guidance on the CJRS says that the National Insurance reclaim must be adjusted by “any Employment Allowance used in that pay period”.  If it was not claimed, there can be none to use and none to offset in the calculation of the National Insurance grant.

There seems to be nothing in guidance or legislation that disallows this. 

One of the problems that members and readers have expressed to us through our Uniting Payroll app is what they should do when calculating the National Insurance reclaim grant under the Coronavirus Job Retention Scheme (CJRS).  The guidance says:

In calculating the total employer National Insurance contributions paid in any pay period, the employer should subtract any Employment Allowance used in that pay period. If you have not, or do not expect to pay any employer National Insurance contributions in a pay period as a result of the Employment Allowance, you should not claim any employer National Insurance contributions costs for furloughed employees in that pay period

Several users of the app have indicated that their software / payroll providers have not included this feature meaning that employers have to manually offset the allowance.  This increases complexity of an already complex calculation.

It has long been our view that employers can “work around” this by not claiming the Employment Allowance in the first place.  If there is no claim then there can be nothing to offset in the calculation.

So, we were pleased to see guidance from the Institute for Chartered Accountants in England and Wales (ICAEW) that said the same thing.  This was part of their “CJRS – emerging issues and answers” publication on their website.  Addressing this issue, their Tax Faculty wrote:

“The Tax Faculty suggests that it may be simpler not to claim employment allowance until later in the tax year. All claims for employment allowance had to be reset in April. This avoids the need to adjust the grant for employment allowance. 

Global Payroll Association Comment

There is nothing to say that the Employment Allowance has to be claimed at the start of the tax year, though we appreciate that this is what many employers do.  HMRC’s guidance explicitly says “you can claim at any time in the tax year”.

The HMRC guidance on the CJRS says that the National Insurance reclaim must be adjusted by “any Employment Allowance used in that pay period”.  If it was not claimed, there can be none to use and none to offset in the calculation of the National Insurance grant.

There seems to be nothing in guidance or legislation that disallows this.