SMEs accidentally overclaiming for National Insurance Contributions (NICs) they do not pay could result in them having to repay thousands of pounds back to HMRC down the line, according to UHY Hacker Young
The accountancy firm explains that it has seen many small business applications for the coronavirus job retention scheme that includes the cost of their employer’s NICs for furloughed employees. However, for many SMEs that cost is already being covered by the Government.
Under the existing employment allowance, businesses that pay less than £100,000 in NICs each year can apply for up to £4,000 of tax relief on that bill. This relief is used by many micro-businesses to reduce their National Insurance bills to zero.
HMRC is currently paying furlough scheme claims to businesses as quickly as possible – but UHY Hacker Young says that those who overclaim by mistake will have to pay that money back to HMRC later.
Michael Fitch, partner at UHY Hacker Young, said: ‘It’s great that HMRC is taking the pragmatic approach of getting furlough scheme money out to businesses as quickly as it possibly can. However, it will catch up on its calculations later, and a lot of SMEs are going to be hit by nasty bills from accidentally overclaiming.
‘An unexpected bill of several thousand pounds from HMRC is the last thing small businesses will want to see as they fight to recover from the economic shock of coronavirus. If they are not very careful with their furlough scheme applications, they are putting themselves at risk of just that.’
An HMRC spokesperson told Accountancy Daily: ‘We understand that sometimes there might be an error in applications, and we are working on a process for claims to be amended after submission.
‘If we spot an error then, where possible, we are contacting the employer or their agent to clarify the application.’