Debts arise as a result of compliance activity and are in
addition to the NIC debts on BROCS.
Before October 1985 an upper earnings limit applied to both
employees and employers National Insurance. This meant there was a
ceiling on the amount of NICs both parties were due to pay.
The abolition of the upper earnings limit for
employers’ secondary NICs meant that employers had to pay
secondary NICs on all employee earnings above the upper earnings
limit. To avoid this increase in costs, employers began making
payments of non-cash remuneration.
It is usually secondary NICs that the employer is seeking to
avoid, but some cases will also include a liability for
employees’ primary contributions. There may also be an
associated tax debt under Regulation 80 Income Tax (Pay As You
Earn) Regulations 2003.
Employers have used a variety of arrangements and schemes over many years, in the belief that if the employee was paid by way of an asset rather than money, it would avoid Class 1 liability. There are numerous schemes involved such as gold bullion, gold coins, oriental carpets, platinum sponges etc. Other schemes involve a series of financial arrangements or transactions, for example insurance policies, trade debts or offshore trusts.
Employers who have used avoidance schemes have been issued with
a Section 8 decision, and the NICs debt is under appeal (see
DMBM527150).
Even if the NICs debt is under appeal, and recovery action
cannot commence, the NICs and any interest are still subject to
limitation. HMRC must therefore take protective (claim) action to
ensure that any determined NICs debt can be enforced (see
DMBM525200).
