HMRC confirms unused Employment Allowance can be used to reduce other tax costs

Employers who delay their Employment Allowance claim and have unused Employment Allowance available at the end of the tax year “can use this to reduce other tax costs”, it has been confirmed.

The new guidance comes after taxpayers reported confusion as to whether or when they should claim the allowance after claiming a grant to pay furloughed employees under the Coronavirus Job Retention Scheme (CJRS).

Updating the official guidance, the regulator said: “The rules for claiming and applying the Employment Allowance are not different because you are claiming a Job Retention Scheme grant for your Class 1 employer National Insurance contributions costs.

“Employers who delay their Employment Allowance claim and have unused Employment Allowance available at the end of the tax year can use this to reduce other tax costs.

“Employers who have received a grant for employer National Insurance contributions costs through the scheme should deduct the amount of grant they have received from the amount of Employment Allowance they have left before they use it, if not doing so would result in receiving relief for the same cost twice. Attempting to get relief for the same costs twice is a fraud and may result in claims being investigated.”

It means that the Employment Allowance can be used against other tax costs so long as the relief is claimed after the period in which the CJRS grant is claimed.

HM Revenue & Customs (HMRC) also changed the rules around claiming Employment Allowance this year, further adding to the complexity of the relief.

Under the changes introduced on 06 April 2020, the employer’s Class 1 National Insurance Contributions (NICs) liability for the previous tax year must be less than £100,000 and they must not have received state aid in excess of its trade sector threshold in order to claim Employment Allowance.

The Employment Allowance enables employers to reduce their annual NIC liability by up to £4,000, providing they meet a number of conditions.

For support claiming the Employment Allowance and other tax reliefs, please get in touch with our expert team today.