Interaction between the employment allowance and the coronavirus job retention scheme (CJRS)

Produced by Tolley
  • (Updated for Coronavirus (COVID-19))
Interaction between the employment allowance and the coronavirus job retention scheme (CJRS)

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Interaction between the employment allowance and the coronavirus job retention scheme (CJRS)
  • Introduction
  • Coronavirus job retention scheme (CJRS)
  • Employment allowance
  • Interaction between the employment allowance and the CJRS
  • Common issues
  • Claimed the employment allowance and made reduced CJRS NIC grant claim
  • Claimed the employment allowance and overclaimed CJRS NIC grant
  • Claim for employment allowance mid-tax year ― avoid double relief
  • Insufficient NIC liability to utilise employment allowance in the rest of the tax year

Introduction

There has been some confusion about theinteraction between theemployment allowance and thecoronavirus job retention scheme (CJRS).

This guidance note discusses how thetwo sets of rules work together and considers thefollowing potential issues that may have arisen in practice:

  1. claimed theemployment allowance and made reduced CJRS national insurance contributions (NIC) grant claim

  2. claimed theemployment allowance and overclaimed CJRS NIC grant

  3. avoiding double relief where theclaim for employment allowance is made mid-tax year

  4. insufficient NIC liability to utilise employment allowance in therest of thetax year

Before covering theinteraction, it is worth summarising both provisions.

Coronavirus job retention scheme (CJRS)

Under theCJRS, employers may be able to obtain a grant from theGovernment up to a limit to cover a percentage of thetotal of:

  1. furloughed employees’ wages (up to a cap)

  2. the associated employer secondary Class 1 NIC (up to 31 July 2020, as employers must pay these costs from 1 August 2020 onwards), and

  3. the minimum employer automatic enrolment pension contributions (up to 31 July 2020, as employers must pay these costs from 1 August 2020 onwards)

Coronavirus Act 2020, ss 71, 76; HM Treasury Directions dated 15 April 2020, 22 May 2020, 25 June 2020

For full details of thescheme, see theCoronavirus job retention scheme (CJRS) guidance note.

Employment allowance

From 6 April 2020 onwards, theemployment allowance is £4,000 per tax year. It is used to reduce theemployer’s secondary Class 1 NIC payment due to HMRC. It cannot be used against theemployer’s Class 1A or Class 1B NIC liability.

The employment allowance is available to most small employers, although there are conditions to prevent it from being used by ‘director-only’ companies and most domestic payrolls. Employers with a secondary Class 1 NIC in theprevious tax year of over £100,000 (measured at a group level) also do not qualify for theemployment allowance with effect from 6 April 2020. For full details of

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