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HMRC internal manual

Compliance Operational Guidance

From
HM Revenue & Customs
Updated
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Supporting Guidance: employer compliance: guidance by subject: directors: PAYE and NIC

Employers have a legal obligation to deduct and account for PAYE and NIC and must

  • deduct the correct amount of PAYE from directors pay
  • work out the correct primary and secondary NIC which are due on directors earnings and
  • pay the PAYE and NIC to HMRC.

Compliance action should therefore be directed at the employer and not the director, even though in practice it may appear that the two are the same.

Where PAYE and NIC have not been accounted for on a director’s employment income you should

  • for closed tax years

    • calculate the PAYE
    • calculate the NIC (COG930030)
    • agree a Class 6 settlement, inclusive of interest and penalties where appropriate and
    • consider COG930080 
  • for ‘current year’ closed tax periods

    • calculate the PAYE
    • calculate the NIC (COG930030)
    • instruct the employer to report the correct year to date figures for pay and deductions on the next Full Payment Submission (FPS).

Note: Where you are recovering duties for closed years and a Class 6 settlement has been agreed, if the employer requests that the current year liabilities are included in the contract settlement, where it is more cost-effective or administratively convenient, see CH411100, the ‘current year’ closed tax periods can be included in the contract settlement.

  • for current year tax periods only 

    • calculate the PAYE
    • calculate the NIC (COG930030)
    • instruct the employer to report the correct year to date figures for pay and deductions on the next FPS.

You should also remain aware of alternative methods of recovery when faced with the relevant circumstances: