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HMRC internal manual

Debt Management and Banking Manual

HM Revenue & Customs
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Debt and return pursuit: miscellaneous charges: under-deductions of PAYE and NICs direct from employee


Under certain circumstances employees can be made liable for under-deducted and unpaid PAYE and NIC.

Income Tax

Regulation 72 and 81 - The Income Tax (Pay As You Earn) Regulations 2003 - which allows for a direction to relieve the employer of the liability.

A direction to “transfer” the liability to the employee comes under Regulation 81(4A) and is notified to the employee by the issue of a direction notice.

Where a direction is made, the tax is recovered from the employee through (an adjustment to) their SA return or through a discovery assessment.


Similarly, under Regulation 86 of the Social Security (Contributions) Regulations (SSCR) 2001 employees can be made liable for under-deducted and unpaid NICs.

Where conditions are satisfied the decision to transfer liability comes under Section 8(1)(c) of the Social Security Contributions (Transfer of Functions) Act 1999. This is identified as a Section 8 Employee Only NIC charge.

The employer is relieved of their liability to pay by paragraph 3(1) Schedule 1 S Social Security (Contributions) and benefits Act (SSCBA) 1992

The NICs become payable by the employee under section 6(4) SSBCA 1992.

The NICs and related interest are recoverable from the employee through paragraph 17A Schedule 4 SSCR 2001.


Directions for the tax and NIC may be appealed. The guidance for this can be found within the Appeals reviews and tribunals guidance (ARTG), see ARTG.


Late payment Interest is chargeable on the

  • tax under Regulation 82 The Income Tax (Pay As You Earn) Regulations 2003
  • NICs under 17A Schedule 4 SSCR 2001.

The tax charge

Appropriate SA amendments/assessments will be made so that the direction tax is included on the SA Statement of Account.

In most cases, the reckonable date on the SA liability will be changed from 31st January back to 19th April of the previous year e.g. 31/01/2004 to 19/04/2003.

However, there will be instances where the reckonable date cannot be changed. Where this happens, compliance will ask the SAFE Unit to create a stand alone interest charge on SAFE using the SA UTR, covering the period from 19/04 to the following 31/01. Interest after this period will be picked up by SA.

The NIC charge

The charge for NIC is raised of SAFE under charge type “Sec 8 - Employee only”.

Charges: accounting and recovery

Section 8 Employee Only NICs charges are raised on SAFE by the relevant compliance team under the SA UTR.

They are accounted for on SAFE under charge type “Sec 8 - Employee only”.

SAFE will issue two requests for payment. If the debt remains unpaid it will be sent on to the DTO and will appear as an entry on the DTO’s SAFE Local Action work list.

Linking debts

The tax element is accounted for through the SA system by either an adjustment to the return or by a making a discovery assessment. These will appear on the appropriate IDMS work list.

It is vital all elements of the debt - tax, NICs, stand-alone interest charges any other associated charges - are linked before any contact or communication with the taxpayer and all linked items are referred to in all communications.

All debts must be linked before taking any recovery action.

It is possible that the SA liability or the SAFE Employee only NIC charge may appear before you are notified of the other associated debt. In these cases you should make a note to link the other upcoming debt and work them all together.

Debt Technical Office (DTO) action

Action to take when all debts linked

Where a telephone number is held, you should

  • telephone the debtor (consider making up to three attempts at different times/days) and

    • advise the debtor of the total amount outstanding (SA, NIC and accrued interest to date) ensuring that you advise the debtor that interest continues to accrue until payment.

Where your telephone contact has not produced payment, a telephone number is not held or you have been unable to speak to the debtor in person, you should

  • issue the appropriate enforcement warning letter and
  • pass the case on for enforcement.


Interest on employers’ Class 1 NICs is charged under paragraph 17 of Schedule 4 of the Social Security (Contributions) Regulations 2001. SAFE will automatically calculate any interest and display this as accruing interest on the charge record itself, on any requests for payment issued and will, if appropriate, create an interest charge when the debt is paid.

If you need to calculated forward interest for enforcement purposes, use interest calculator SAIN, 365 days.

Payment received

Use the Print Payslip to prepare a payslip using the SAFE charge reference and sent it to the Accounts Office Shipley in the normal way.

Appeal received

If you receive an appeal, you should suspend recovery action and send the appeal to Specialist Investigation, Insolvency & Securities Team responsible for raising the Direction.


You may take any of the normal methods of enforcement to secure payments of these debts from the employee. You can find further guidance on all aspects of enforcement in DMBM650000.


Follow current normal remission procedures as at DMBM725000.


If you are notified of insolvency, then ownership of any debts should be transferred to ICHU in the normal way.

Northern Ireland

In Northern Ireland insolvency cases should be referred to EIS Edinburgh (Belfast Team).