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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Class 1: Treating as paid: When NICs cannot be treated as paid: Negligence

Regulation 60, Social Security (Contributions) Regulations 2001

NIM12111 explains that the above regulation can be used to allow unpaid primary Class 1 NICs to be treated as paid for the purpose of entitlement to contributory benefit. However, the NICs cannot be treated as paid where it is established that the failure to pay was

  • due to the consent or connivance of the employee; or
  • attributable to any negligence on the part of the employee.

For a definition of consent and connivance see NIM12115.

Negligence is not defined in the Regulations but it will generally occur when someone fails to do what a prudent and reasonable person would do, or simply fails to exercise reasonable care.

You may have to 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 the company does not mean that an assumption of negligence can be made. An opinion on whether there has been negligence can only be reached by consideration of the relevant information in each individual case.

Although less common, you may also have to consider potential negligence for other employees. For example, where the employee is the wages clerk.

As a general rule, you can assume that a reasonable person would take reasonable care to

  • comply with the requirements of the law;
  • take personal responsibility for their NICs liability;
  • maintain records of any payments made or correspondence about liability;
  • read carefully any notes or leaflets with which they are provided;
  • seek professional help with any matters with which they are unable to deal.

NIM12117 explains in more detail what you need to consider in forming an opinion on whether a person has been negligent.

Where you can establish that the failure to pay the primary Class 1 NICs was due to negligence on the part of the employee, the unpaid NICs cannot be treated as paid and must not be recorded on the NI account. If any unpaid NICs are already recorded, those NICs must be removed from the account. NIM12119 provides further information on removing NICs from NI accounts.