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HMRC internal manual

Decisions and appeals for National Insurance Contributions and Statutory Payments

Notices of decision: Who to name in decisions: Westek Ltd v HMRC Commissioners

In the Westek case (SpC 629), the Special Commissioners decided whether the notices of decisions issued by HMRC under section 8 of the Social Security Contributions (Transfer of Functions) Act 1999 (the Transfer Act) were invalid. The decision was published on 16 August 2007.

HMRC contended that large payments or awards falling into two categories that had been made by the employer to or for the benefit of three directors, were liable to primary and secondary National Insurance contributions (NIC). The NIC decisions did not name the directors. The decisions were as follows

  1. That Westek Ltd is liable to pay primary and secondary Class 1 contributions for the period 6 April 2000 to 5 April 2004 in respect of the earnings of employees in receipt of management charges from the company.
  2. The amount Westek Ltd is liable to pay in respect of those earnings is £339,301.17.
  3. The amount that Westek Ltd has paid in respect of those earnings is nil.

A covering letter was sent with the decisions explaining why the decision was issued and how HMRC had calculated the NIC due.

The employer contended that the section 8 decision and notice were void for a number of reasons, some of which were because

  • they failed to clarify which employees/directors were involved, in that they only referred to ‘earnings of employees’;
  • the decision and notice were invalid because they failed to name every person in respect of whom the decision was made,
  • the directors were concerned with the decision because their NIC would be affected by the contentions being advanced, and therefore they were persons in respect of whom the decision was made.

The Special Commissioners decided that the decision and the notice were entirely consistent with the requirements of the Transfer Act and the Social Security Contributions (Decisions and Appeals) Regulations 1999 (SI 1999 No 1027).

Despite the findings in the Westek case, where Class 1 NIC are due and includes primary NIC, you are required to name employees or directors wherever possible. That is because the decision could affect an employee’s entitlement to benefits. See DANSP41100 for further guidance about who to name in decisions.