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HMRC internal manual

Compliance Operational Guidance

From
HM Revenue & Customs
Updated
, see all updates

Supporting Guidance: employer compliance: guidance by subject: compliance revenue recording: failure to report Benefits and understated benefits

Benefits

Where an underpayment is identified in relation to benefits provided to employees and/or directors you should

For Tax

  • calculate any underpayment of tax
  • consider the guidance at COG930060 - Recovery from Director Personally.

For NIC

  • calculate and pursue any underpayment of Class 1 or Class 1A NIC for closed years
  • calculate and pursue interest
  • consider penalties (COG914045, COG914050, COG914055, COG914070, COG914075)
  • for Class 1A NIC calculate a current year adjustment in accordance with COG906590 
  • for Class 1 NIC calculate the underpayment for the ‘current year’ and either

    • instruct the employer to report correct year to date figures on the next Full Payment Submission, see COG904250 or
    • include the underpayment in a contract settlement whether other liabilities are due, see COG904260 
  • record the full amount of the underpayment, interest and penalties on Caseflow
  • record the amount of any current year adjustment on Caseflow
  • consider and record Future Revenue Benefit where appropriate (see COG915640).

Where COG930060 allows the tax to be included in the Class 6 settlement you should

  • invite the employer to pay the tax on a voluntary ‘grossed up basis’, (COG908060, COG911010)
  • calculate the Class 1 NICs due on the tax borne see COG911010/COG908070 
  • calculate a current year adjustment in accordance with COG906590 (where appropriate see COG915640)
  • consider penalties for incorrect P11Ds in appropriate cases (COG914080)
  • record the full amount of compliance revenue on Caseflow
  • record the amount of the current year adjustment on Caseflow
  • consider and record Future Revenue Benefit where appropriate (see COG915640).

Loan Accounts

Where

  • a loan account exists, and
  • benefits have not been returned

you should liaise

  • with the IT/CT caseworker in the relevant customer group or
  • the customer relations manager (CRM) or Customer Co-ordinator in large employer cases

to confirm whether recovery by class 6 settlement, or referral for a SA enquiry is appropriate.

A loan account should not be routinely used to discharge the liability as this may result in a loss of Class 1 or Class 1A NICs, interest and penalties.