End of Year Employment Allowance FAQs
Article ID
11830
Article Name
End of Year Employment Allowance FAQs
Created Date
24th March 2022
Product
IRIS PAYE-Master, IRIS Payroll Business, IRIS Bureau Payroll, IRIS GP Payroll, IRIS Payroll Professional, Earnie, IRIS Earnie IQ
Problem
End of Year Employment Allowance FAQs.
For employment allowance procedures, reporting and general FAQs, click here.
Resolution
Is employment Allowance changing in the 2022/23 tax year?
Yes. The maximum amount you can claim for EA is increasing to £5000 for the 2022/23 tax year.
As per 21/22, employers with a Class 1 secondary National Insurance liability of £100,000 or more in the preceding tax year are no longer eligible for Employment Allowance. Class 1 secondary National Insurance means Employer’s NI.
Additionally, as introduced in 2020/21, Employment allowance will be given as de minimis State Aid. Therefore, the Employment Allowance application will need to take account of the rules on de minimis State Aid, if said rules apply to your business.
Employers must check to see if they are eligible, and submit a new claim for the Employment Allowance each tax year, as claims will not automatically renew each tax year.
Please Note: If you are still eligible to claim employment allowance you must send an EPS in April to renew your claim. Claims will no longer be automatically carried over to the new tax year.
For details on de minimis state aid options please see here:
https://www.iris.co.uk/support/knowledgebase/kb/12230/
How do I continue claiming Employment Allowance in the new tax year?
If you are still eligible to claim employment allowance in the new tax year you will need to send an EPS for April to renew your claim with HMRC. You must send an EPS in April to renew your claim even if you have no other requirement to submit an EPS for that month e.g, no statutory payment recovery, apprenticeship levy, etc.
For employment allowance procedures, reporting and general FAQs, click here.
Can HMRC use my unused Employment Allowance against my other PAYE liabilities (ie tax, student loan repayment etc)?
The Employment Allowance is based on your employer Class 1 NICs liability shown on your Full Payment Summary (FPS), and normally would be set against your employer Class 1 NICs liability as it arises during the year. The maximum award you can have in a year is the lesser of the total of your employer Class 1 NICs and £4,000.
If you have not used your Employment Allowance award in full (eg because you claimed the Employment Allowance late and did not have enough employer Class 1 NICs liability for the remaining part of the year), HMRC will offset the balance against other current or future PAYE liabilities, so the allowance is not lost.
If you have been claiming Employment Allowance for the whole tax year but did not have enough employer Class 1 NICs liability to claim the full £4000 you will not be able to transfer that remaining balance into the new tax year.
Where you make a claim for the Employment Allowance after the end of the tax year, this will be offset against any outstanding PAYE liabilities, or current/future liabilities. Or you can ask HMRC for a payment of any balance, provided you have no outstanding PAYE liabilities.
To apply for this contact HMRC: 0300 200 3200
For employment allowance procedures, reporting and general FAQs, click here.
What happens if a business with more than one PAYE scheme doesn’t use the full £4,000 Employment Allowance during the year?
If you do not use your full £4,000 allowance entitlement against your nominated PAYE scheme, but you have employer Class 1 NICs liability on your other PAYE schemes, and have paid all your PAYE up to date, you can apply to HMRC (at the end of the tax year) for a refund of any unused balance. Your unused balance will be the lesser of £4,000 or the total employer Class 1 NIC liability for all your PAYE schemes, less the allowance already given against your nominated PAYE scheme.
Example: If your nominated PAYE scheme had £1,000 employer Class 1 NICs, and your total employer Class 1 NICs for all your schemes was £1,800, you would have an unused balance of £800 (ie £1,800 less £1,000). If you do not apply for a refund, and have an unused balance you should apply to HMRC to use this against any forthcoming PAYE debt.
To apply for this contact HMRC: 0300 200 3200
For employment allowance procedures, reporting and general FAQs, click here.
Can I claim the Employment Allowance for an earlier tax year?
Yes, you can make a claim up to 4 years (The earliest you can claim employment allowance for is 2014/2015 tax year) after the end of the tax year in which the allowance applies. For example, you want to make a claim for the Employment Allowance for the tax year 2014 to 2015. The tax year ends on the 5 April 2015, you must make your claim by the 5 April 2019.
You will need a separate EPS for each year’s claim.
If you send your claim one year after the tax year has ended, your claim will continue into the current tax year, unless you already have a claim for the Employment Allowance in place that year. If you have paid your PAYE up to date, HMRC will set any Employment Allowance award against your future or existing PAYE liabilities, unless you ask them to refund the amount.
For employment allowance procedures, reporting and general FAQs, click here.
What happens if the business changes ownership, before using its full £4,000 Employment Allowance?
Any claim for Employment Allowance for a business that is taken over stops when your business changes ownership. The new ownership will be able to make a claim for the full £4,000 allowance in its own right only for its existing business. You cannot transfer any balance of unused allowance between the old and new businesses.
For employment allowance procedures, reporting and general FAQs, click here.
What do I do if I am no longer eligible to claim the Employment Allowance?
If your business or charity stops employing staff during the year, you will no longer have a liability to pay employer Class 1 NICs and you do not need to do anything further.
In the rare circumstance, the nature of your business changes and your business is no longer eligible for the Employment Allowance; you can stop your claim by turning off the employment allowance option in your payroll software and sending an EPS.
Stopping your claim means that no allowance is due that year, and you must repay any Class 1 NICs (previously covered by the Employment Allowance). If you haven’t paid your PAYE (including Employer Class 1 NICs) in full and on time, then once your claim has stopped you may be charged a late payment penalty. For information on late payment penalties please see
https://www.gov.uk/what-happens-if-you-dont-pay-paye-and-national-insurance-on-time
Why doesn’t the employment allowance show on my p35?
This is because, under RTI, the p35 is now a retired report and should not be used.
Further details are here:
https://www.iris.co.uk/support/knowledgebase/kb/11847
For employment allowance procedures, reporting and general FAQs, click here.
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