Holding Back P35 Penalty Tide

HMRC has agreed to provide employers with more timely and efficient information in an attempt to encourage the timely submission of PAYE end of year returns.

Where employers do not file their annual P35 return by 19th May, they incur penalties of £100 per 50 (or fewer) employees for every month (or part month) that their return is late.

Last year saw a number of companies receiving penalty notices for £400 or more, prompting accusations that the Revenue deliberately waited at least three months before alerting employers to the accruing penalties. As a result, HMRC has now promised to reduce the number of cases in which excessive penalties are charged.

In a joint statement issued by HMRC, professional bodies and tax charities, the Revenue has announced the following measures to help employers comply with their PAYE obligations:

• Change the notification date to complete the 2011/12 P35 from mid-February to mid-March 2012, so that employers receive it closer to the end of the tax year.
• From 28th April 2012, an “Employer Annual Return Reminder” will be issued where HMRC believe a 2011/12 P35 remains outstanding.
• From 31st May 2012, a “P35 Interim Penalty Letter” will be issued to employers so that it reaches them within a month of the filing deadline. The letter will explain to employers that they have incurred a late filing penalty and what action to take to prevent it increasing.
• Improve the online guidance for submitting P35's electronically, including specific advice about the test-in-live service to reduce the number of employers who believe their test submission is the live submission. The on-screen messages within the HMRC online product will also make it much clearer that even when a successful test transmission has been made, a live transmission is still required.
• HMRC Employer Helpline staff will be instructed to tell employers about filing dates when new employer schemes are being set up, to help them avoid a penalty.
• For next year, the information on the P35 and reminders will be improved to include a warning that the first penalty notice will cover four months.

HMRC believes that these new measures should aid employers to avoid incurring unnecessary penalties and significantly reduce the imposition of penalties in excess of £100.