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
-
Getting out of the child benefit tax trap
You expect to earn over £60,000 for this tax year which means you may have to pay back some or all of your family’s child benefit due to the high income child benefit charge (HICBC). Is it possible to reduce the charge?
-
HMRC targets “dodgy shops” in new compliance crackdown
The government has announced a new crackdown on businesses suspected of facilitating tax evasion, with HMRC increasing its focus on so-called "dodgy shops" used to enable tax fraud. What is HMRC targeting?
-
Mandatory payrolling of benefits in kind delayed
The government has revised plans to introduce the mandatory payrolling of benefits in kind from 6 April 2027, which will now be limited to company cars, vans, fuel and medical benefits. What's the full story?