In all the chaos of COVID-19 the changes to the EA from April 2020 got somewhat lost. By way of a catch-up; this was a grant introduced a few years ago to help stimulate job creation. It allowed employers to write off the first £2,000, increased to £3,000 and now set at £4,000, of employer national insurance per tax year.
As ever with new schemes, the rules started out pretty simple. All you had to do was have a PAYE scheme, employ staff, incur employer national insurance and you were away. Barring some limiters for related/group companies, that was it.
From April 2020 that all changed. Now limited to employers whose employer national insurance liability for the previous tax year is under £100,000 it is no longer available to all employers.
Secondly, by becoming effectively means tested (not available to all) it comes under some complicated rules relating to EU state-aid. So potentially you could be entitled (under £100k employer NI last year) but then barred because you have exceeded the de minims state aid threshold for your sector (seriously).
Thirdly, along came COVID and furlough grants that allowed you to claim employer national insurance in your claim (but not if you were already claiming it under EA relief). Are you still with me?
Our professional industry guidance at the time (and subsequently backed by HMRC) said defer claiming EA in order to be able to claim employer NI through the furlough grant. This made sense – you cannot claim both so claim one and then claim the other when furloughing is a thing of the past. From August onwards employer NI cannot be claimed under the furlough grant and as such the time has come for us to start claiming EA for our clients that have been using the furlough grant.
So far so good. However, EA is a simple flag on the software to say “Claim for current tax year!” It is not date specific and HMRC will relieve employer national insurance from day one of the tax year irrespective of when the flag is activated. So deferring the claim until September has no effect! And what happened at day one? We claimed at least some of that NI liability back from HMRC where there were furloughed employees. HMRC are quite specific that you cannot claim this relief twice but we just have done exactly that.
In many cases this problem goes away:
- As of April 2020 you were no longer entitled to claim EA as your total employer NI bill for you (and your associated employers) exceeded £100k – nothing to do. No EA claim can be made and furlough claim for employer NI is valid, and
- You are small enough to be able to make a claim for EA but big enough that in the period August to March 21 (no furlough NI claimed) you will incur employer NI in excess of £4,000 and thus you will not be double claiming NI between April and July 2020 under the furlough scheme.
HMRC, we have a problem…
For those that fall into neither of the above (small enough to claim and small enough to not exhaust the £4,000 of allowance between August and March) we have a problem. Through no fault of yours or ours; we will have an over-claim of employer NI relief when the furlough grants are combined with the EA grant. Joy.
All we can do is monitor this and advise you accordingly. We do not know how you would go about repaying such over-claims. The obvious route would be through the furlough scheme where you can contact them, declare an over claim and repay monies. But given that we will not be able to quantify the over-claim until the end of the tax year (so next April) will the furlough scheme still be in existence then to report the over claim? We have no idea.