HMRC have expanded their coverage of this topic in the Employment Income Manual at EIM 00805 (addressing the provisions of ITEPA 2003, s. 11(3)).
Referring to the Upper Tribunal case of HMRC v Martin [2014] UKUT 429 (TCC), the commentary now includes the following paragraph on PAYE and NICs:
“The Martin case also established that when a payment or bonus is ‘clawed back’ and a payment of negative earnings is made from employee to employer, this does not change the position of NICs or PAYE deductions for the original payment. No relief or repayment of NICs is possible. In these circumstances it is not necessary for the employer to make any changes to their RTI submissions. Taxpayers should contact HMRC directly to claim any tax relief due in the year the payment of negative earnings was made.”
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim00805
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