ECH22525 - Yield Recording: Failure to Report Benefits and Understated Benefits

Where an underpayment is identified in relation to benefits provided to employees and/or directors the ECO should ForNIC

• calculate and pursue any underpayment of Class 1 or Class 1A NIC,
• calculate and pursue interest,
• consider penalties ( ECH21020, ECH21025, ECH21026, ECH21040, ECH21041),
• calculate a current year adjustment in accordance with ECH9045 where appropriate (see ECH22540),
• claim the full amount of the underpayment, interest and penalties on ECS,
• claim the amount of any current year adjustment on ECS.

For Tax

• calculate any underpayment of tax,
• consider the guidance at ECH17035.

Where it is acceptable for the tax to be included in the Class 6 settlement. The ECO should

• invite the employer to pay the tax on a voluntary ‘grossed up basis’, ( ECH12030ECH15005),
• calculate the Class 1 NICs due on the tax borne (This text has been withheld because of exemptions in the Freedom of Information Act 2000)
• calculate a current year adjustment in accordance with ECH9045 where appropriate (see ECH22540).
• claim the full amount of yield on ECS,
• claim the amount of the current year adjustment on ECS.

Where it is not acceptable to include the tax in the Class 6 settlement or the employer refuses to pay the tax the ECO should

• follow the guidance at ECH22565.

Loan Accounts

Where

• a loan account exists,
• the PAYE accounting year has closed and,
• benefits have not been returned

the ECO should

• liaise with LBT/MBT/SBT/PRC to obtain clearance for recovery by Class 6 settlement or S9A Enquiry.

A loan account should not be routinely used to discharge the liability as this may result in a loss of Class 1 or Class 1A NICs, interest and penalties.

If a benefit has not been reported but the full amount is subsequently debited to the Directors Loan Account, in effect the director has reimbursed the company for the benefit. There is no loss of tax or NICs therefore no yield can be claimed.