I've been reading about the employment allowance (EA) on HMRC’s and other websites, and it appears that regardless of when a company becomes eligible for EA in the tax year, the company can claim back National Insurance contributions (NICs) up to the allowance for all eligible employees for the entire year. Furthermore, the HMRC website states that any unclaimed allowance at the end of the year can be received as a refund or used to pay towards corporation tax. This almost suggests that HMRC is effectively giving any company that is eligible £5,000, even if a company only becomes eligible one month before the end of a tax year. This doesn't sound right to me. Is this correct, or am I misreading this? 

Arthur replies: 

See HMRC’s National Insurance Manual at NIM06505. Yes, EA can be claimed at any time during the tax year, even at the end of the tax year. If, for some reason, the EA cannot be set against all the NICs paid during the year, the excess can be set against other taxes owed by the employer to HMRC or refunded. But I think it is necessary to make the following point clear, which may answer your underlying question. EA, which is a maximum of £10,500, can only be utilised against NICs that have been paid by the employer. The maximum amount of EA that the employer is entitled to is the smaller of: (a) the NICs paid by the employer; and (b) £10,500 (see HMRC’s National Insurance Manual at NIM06585).