Employment Allowance - double entry

Moominyak
Moominyak Registered Posts: 38 Regular contributor ⭐
in General accounting discussion
Does anybody know the definitive answer to how this should be posted to the accounts?

Is it DR P&L as usual, CR HMRC control and then a reversal (or just don't bother in the first place!), OR

DR P&L, CR HMRC control, followed by CR (non-taxable) income, DR HMRC control.

Not really an issue either way at the moment, but once the ERNI exceeds the remaining allowance, how does one determine which employees / depts it should be applied to? Companies will end up with some depts incurring greater ERNI costs than others, I can see that potentially causing some friction...

TIA :)

Comments

  • Rozzi Rainbow
    Rozzi Rainbow Registered Posts: 465 Dedicated contributor 🦉
    Hi Moominyak

    I don't know the definitive answer to this but I'm just assuming the Employer's NIC expense isn't posted at all whilst the Employment Allowance is being claimed. HMRC are saying you don't need to pay this, therefore the expense does not exist. I can't see HMRC letting you class the allowance as non-taxable income, and still having the NICs as an allowable expense, otherwise you'll be benefitting twice from a tax point of view.

    Whichever month your allowance runs out, I would just apportion the remaining NICs payable between the departments. e.g. if it works out that in the final month say 75% can be reclaimed, and 25% becomes payable, then just charge each department with 25% of their NIC costs.
  • coojee
    coojee Registered Posts: 794 Epic contributor 🐘
    And it's even worse when you've got a member of staff on long term sick. A company I do the payroll for have received £150 EA but have paid £385 SSP of which they would have been able to recover £350 so they're £200 worse off this month. Whoopeedoo
  • Rozzi Rainbow
    Rozzi Rainbow Registered Posts: 465 Dedicated contributor 🦉
    One of our clients often has a couple of employees off sick at any one time, and were able to reclaim a lot of the SSP. They don't even qualify for EA due to their biggest customer being the local council. They're really not happy as they lose out twice!! HMRC shouldn't advertise the EA to replace the SSP reclaim - if this was strictly true then employers who don't qualify for EA should still be allowed to reclaim their SSP.
  • coojee
    coojee Registered Posts: 794 Epic contributor 🐘
    It's all a big con as they're trumpeting the EA but quietly brushing under the carpet the SSP issue. How long til SMP gets dragged in as well.

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