ECH22104 - Settlement: Recovery of Tax and/or NIC from a Director or Employee – Action to be taken

Action by Caseworker

Prior to submitting the case to ICS, the caseworker will have established that the employer is not in a position to pay the PAYE/NIC liability.

The caseworker should be satisfied that

• relevant payments have been received and the extent of these
• an under-deduction of tax has taken place (and/or the employer has failed to pay the employees primary Class 1 NIC)
• the tax/employee's primary Class 1 NIC remains unpaid.

The caseworker should have reasonable grounds for believing that

• there has been a wilful (deliberate) failure to deduct by the employer
• the employee involved was aware of that wilful failure.

If the caseworker has any doubts about the efficacy of a direction

• make contact with ICS to ascertain if sufficient facts have been established to enable a direction and decision to be made.

Information to be provided by the caseworker to ICS

A submission to ICS should include sufficient basic information to enable a relatively quick decision to be made. The information should include the following.

The background to the case

• outlining why the untaxed amounts are to be regarded as relevant payments.

The employee’s background, covering

• the position held in the company
• the part played in the management of the company and the control of its finances
• any other information relevant to the employee’s knowledge of PAYE or the employee’s knowledge of its operation by the company.

A schedule including

• the total amount of relevant payments received by the employee for each year
• the amount of untaxed relevant payments for each year
• the tax and NIC under-deducted for each year
• relevant payments of tax/NIC deducted and already accounted for on forms P35/P14 or in Regulation 80 determinations.

The submission should be sent with all available files and the investigation papers to the nearest ICS team to the geographical area nearest to the employer’s principal place of business (details of locations can be found on the NTSCI – ICS website)

ICS will notify the EC team of the outcome once the full facts are known, considered and appropriate action taken.

See INS8310 for more information

Penalties for incorrect returns

See ECH21011