PAYE and NI deducted from salaries has to be paid by the employer to HMRC.  This is the normal system of payroll, payslips, net pay, tax deductions, and the money ending up in the hands of HMRC.

What happens if the employer can’t pay the PAYE?  For example if the company ceases trading or is insolvent and goes into liquidation.

The normal position is that HMRC will lose out.  Many companies in the UK go bust owing HMRC thousands, potentially hundreds of thousands, which never gets paid to HMRC.  So the employees payslip shows “tax paid” and “national insurance paid” but from HMRC’s point of view the amounts were never actually paid!

Here is the problem for some directors.  In certain circumstances if a director knowingly approves a salary payment when the company can’t or won’t pay HMRC the PAYE and NI, then the director could be found personally liable.  There are cases on this that have gone in favour of HMRC (director had to pay the PAYE) and some cases in favour of the tax payer (director didn’t have to pay HMRC).  Certainly an area needing professional advice on if this could apply you.