The Coronavirus Pandemic Employers Allowance Has Caused Some Businesses to Unwittingly Claim National Insurance Contributions Twice Which Is Considered Tax Fraud By HMRC
In April this year, the government increased the Employment Allowance (EA) from £3,000 to £4,000 however there were more restrictions on eligibility than in previous years, therefore, employers needed to reapply and will need to do so annually. The Employment Allowance allows eligible employers to reduce their National Insurance liability by up to £4,000 per annum. This means that each time payroll is run, the employer pays less employers Class 1 National Insurance until the £4,000 has been used up or the tax year ends (whichever is sooner).
So far, so good.
The Coronavirus, COVID-19 pandemic hit businesses before some had applied for this scheme. Then, the Coronavirus Job Retention Scheme (CJRS) also known as the furlough scheme was introduced and part of this grant covered the employers payroll costs including the employers National Insurance contribution (when their entire workforce were on furlough from April to July.) This is where the confusion started, two schemes that related to National Insurance contribution
When analysing furlough rules, the Institute of Certified Bookkeepers (ICB) agreed you “use up” the £4,000 allowance then ask for costs over and above from the furlough grant. But, not all employers took this stand and were calculating claims for furlough on full claim back. Ie not using the £4000 Employers Allowance as some employers had not even applied for that allowance they then delayed applying for it.
Then comes July and the start of employers paying towards the costs, the first thing removed from the Coronavirus Job Retention Scheme was the funding for the employers National Insurance contribution, those that had not claimed for the Employers Allowance started to do so.
Some people interpreted the wording that £4,000 allowance was on top of the furlough, an article in Accountingweb added confusion to the issue – but that is another, long story!
HMRC have now confirmed:
- Employers Allowance is a government funded grant
- Furlough is a government funded grant
Fact: you cannot claim more than one government funded grant for a particular cost.
Therefore, if an employer did not apply for the Employers Allowance grant of £4000 until later in the year and the employer claimed furlough you must advise HMRC who will then reduce the amount of £4000 left by the amount of the claim made for furlough. If an employer does not do this, it will be considered to be claiming twice for same component which is considered fraud and may result in all claims being investigated.
Tax fraud, also known as tax evasion, is taken very seriously by HMRC and they have a huge drive to crack down on this, HMRC issue a lot of fines for tax fraud and push members of the public to report possible tax fraud, their tag line is: “HMRC pursue every penny to ensure that tax crime never pays” so employers need to be aware of this and rectify this as soon as possible.