Furlough scheme: has employers’ NI been overclaimed?
The Institute of Chartered Accountants in England and Wales (ICAEW) has issued new guidance that describes two scenarios where employers using the furlough scheme may have inadvertently reclaimed secondary Class 1 NI twice when the scheme was first introduced. What’s the full story?
The Coronavirus Job Retention Scheme (CJRS) is complex, but broadly employers pay a percentage of an employee's regular salary (at least 80% in 2020), subject to a cap, then reclaim the 80% element from HMRC. However, it also allows secondary Class 2 NI contributions to be reclaimed, as well as pension contributions under auto-enrolment. This has led to some scenarios where employers who claim the employment allowance (EA) of up to £4,000 per year inadvertently receiving furlough payments in respect of NI that is also relieved under the EA. The ICAEW has published detailed commentary on where this may have happened. In brief, an overclaim may occur where:
- EA claims were deferred until after the final claim month for the CJRS where the £4,000 was not absorbed in full during 2020/21; or
- EA claims were made at the beginning of the tax year where the full £4,000 was absorbed before July 2020.
Potentially affected business should carefully read the guidance and contact HMRC’s Employer Helpline on 0300 200 3200 if they think there is an issue.
Related Topics
-
5 April deadline approaching for key tax relief claims
With the end of the 2025/26 tax year now less than seven weeks away, business owners and company directors should remember that several valuable reliefs and elections must be made before 5 April. Which opportunities are about to close?
-
HMRC reminds employers about payrolling benefits deadlines
HMRC is reminding employers of key dates and preparations ahead of the transition to real-time payrolling of benefits in kind (BiKs). With an important voluntary registration deadline approaching, what do payroll teams need to know?
-
Why do frozen mileage rates affect VAT?
Your business pays a fixed mileage allowance to staff who use their private cars for business travel. The rates published by HMRC have been frozen since 2011 but is this relevant to determine how much input tax you can claim on the payments?