For 2020-2021 tax years onwards, you can only claim EA if your total (secondary) Class 1 National Insurance contributions (NICs) liability is below £100,000 in the tax year before the year of claim
Business Sector choice errors
HM Revenue and Customs checks suggest that a number of employers (or their agents/payroll administrators), may be incorrectly selecting the wrong business sector with employers claiming their £4,000 Employment Allowance for 2020/2021 under the new rules.
Some businesses with economic activity are incorrectly making the EPS declaration ‘State Aid rules do not apply’ when this cannot apply.
When claiming Employment Allowance, you must also provide the business sector.
- Aquaculture & Fisheries
- Road Freight Transport
- Industrial / other (for everything else)
Only choose ‘State aid rules do not apply’ when your business does not undertake any economic activity – for instance, charities, community amateur sports clubs, employing someone to provide personal care, who may not be engaging in economic activity and therefore outside de minimis State aid rules
Information has been added into the Employer Bulletin to help explain when a business sector should be chosen or when to select ‘State aid rules don’t apply’.
If an EPS has already been submitted showing the wrong details, this can be corrected by sending another EPS.
Note: Once employment allowance (EA) has been claimed, it will automatically be set against the employer’s ER NICs Bill.
As set out in the EA guidance, a business can claim up to 4 years after the relevant tax year and still receive the benefit.
Employment Allowance and Coronavirus Job Retention Scheme
Guidance on the Coronavirus Job Retention Scheme states calculating the total employer National Insurance contributions paid in any pay period, the employer should subtract any Employment Allowance used in that pay period.
If the employer has not, or does not expect to pay any employer National Insurance contributions in a pay period as a result of the Employment Allowance, they should not claim any employer National Insurance contributions costs for furloughed employees in that pay period.