Supporting Guidance: employer compliance: guidance by subject: settlement: from whom to seek settlement
Whether the employer or the employee is approached to settle the liability depends primarily on who is responsible in law, but there are some exceptions, see COG915175 - Payment sought from Employee.
Generally the following guidelines apply for settlement.
|Duty||Type of Payment||Who is responsible for settlement|
|Income Tax deductible under PAYE||Employment income in cash, including directors’ earnings||Employer|
|Income Tax not subject to PAYE||Non-cash payments such as benefits in kind, pecuniary liabilities||Director COG930060 - Recovery From Director Personally|
|other employee (but we usually invite the employer to settle the other employee’s liability)|
|NIC||Employment income in cash, pecuniary liabilities, benefits in kind||Employer (both primary and secondary contribution) and Class 1A|
Note: The employer is responsible in law for any failure to operate PAYE properly and is required to make good any failure to deduct tax.
In such circumstances, you should not settle direct with an employee or director as the settlement is technically incorrect and it could harm HMRC’s position if any other PAYE failures by the employer come to light.