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HMRC internal manual

Compliance Operational Guidance

Alternative rights of recovery (PAYE directions): primary class 1 NICs: background: considering negligence

Negligence means failing to

  • do what a prudent and reasonable person would do
  • exercise reasonable care.

For the provisions of Regulation 86 SSCR 2001 to apply you will need to establish that the employee was negligent.

You may consider negligence for any employee, but most commonly, consideration of potential negligence will apply to company directors. This is because directors will generally 

  • have access to wage records
  • be able to authorise cheques on behalf of the company
  • be responsible for making payment.

However, the fact that someone is a director of a company does not mean that an assumption of negligence can be made. Equally, if someone is not a director they are not automatically precluded from consideration. Other employees may be considered where they held roles that gave them similar responsibilities such as wages clerks or company secretaries. This can only be determined by considering the relevant information in each individual case.

As you will only be considering negligence in respect of under-deducted primary Class 1 NICs where there has also been an under-deduction of tax your enquiries into those under-deductions will be in relation to the same remuneration. As such, where you believe an under-deduction arises for both tax and primary Class 1 NICs you will need to be satisfied that

  • under-deduction did take place which remains unpaid
  • the employee knew that the employer wilfully failed to deduct the tax/recover the primary Class 1 NICs.

It follows that whilst investigating the suspected PAYE and NICs failures your enquiries will cover the same ground and in addressing both areas at the same time any correspondence will normally combine both tax and primary Class 1 NICs queries.

As such, the action required in deciding that the provisions of Regulation 86 SSCR 2001 are met in any given case will be the same as those used to determine that a direction is appropriate. This is covered in detail at COG931100 onwards.