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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: expenses, benefits and pecuniary liabilities: payment of bills: pecuniary liability payments

Tax and NICs may be due where an employer pays an employee’s bill. This is often referred to as the pecuniary liability principle. See EIM00580 and NIM02270 for further information.

The employer cannot operate PAYE in these circumstances but Class 1 NICs are still due.

Where the employer has not treated the payment correctly you should

  • explain how to make any necessary open year or open tax period adjustments COG906520 
  • seek recovery where appropriate for closed years.

Where an employer gives an employee cash for settlement of the employee’s bill this is not a pecuniary liability. See EIM00590. PAYE should be operated in these circumstances and Class 1 NICs accounted for.