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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: computations: using estimates and obtaining agreement

Where an inaccuracy is discovered but the employer’s records are missing, incomplete, inaccessible, unavailable, illegible or muddled, see COG906160, the only option is to estimate the earnings and the liability due.

Where full records are available it can still be time consuming for all concerned to use detailed extracts, it may be appropriate to estimate earnings for both tax and NICs purposes see COG908091 when it is not appropriate to estimate. Where that is the case you should

  • consider using an estimated computation to save time provided that

    • the employer or contractor agrees the basis of the estimates, see COG908093 
    • the employer or contractor is told any agreement to estimates is without prejudice to the final settlement, which you are not authorised to agree
    • the employer or contractor understands your role is to ascertain the facts and report them for consideration
  • no difficulty is anticipated in collecting any liability.

You should

  • base estimates on the facts of the case by

    • checking representative periods in the records
    • questioning the employer or contractor.

The estimates must take account of

  • reasonable claims that some employees would not be liable to tax
  • employees’ earnings for NICs purposes so that

    • wherever possible primary NICs are allocated to a contributor’s record on NPS
    • employees do not lose state benefit entitlement
    • liability is not charged in circumstances where standard rate NICs is not due, for example old age pensioners.

See COG908100 for more information on estimating the NICs liability.

If there is any doubt or difficulty regarding the best method of estimation, you should consult your manager.

You should record the outcome on Caseflow.