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

Produced by Tolley
  • (Updated for Coronavirus (COVID-19))

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

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

Introduction

There has been some confusion about the interaction between the employment allowance and the coronavirus job retention scheme (CJRS).

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

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

  2. claimed the employment allowance and overclaimed CJRS NIC grant

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

  4. insufficient NIC liability to utilise employment allowance in the rest of the tax year

Before covering the interaction, it is worth summarising both provisions.

Coronavirus job retention scheme (CJRS)

Under the CJRS, employers may be able to obtain a grant from the Government up to a limit to cover a percentage of the total 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 the scheme, see the Coronavirus job retention scheme (CJRS) guidance note.

Employment allowance

From 6 April 2020 onwards, the employment allowance is £4,000 per tax year. It is used to reduce the employer’s secondary Class 1 NIC payment due to HMRC. It cannot be used against the employer’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 the previous tax year of over £100,000 (measured at a group level) also do not qualify for the employment

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