HMRC Relents on Multiple P35 Penalties

HMRC has agreed a new approach to PAYE late filing penalties with professional tax bodies to lessen the number of companies receiving notices for £400+ fines in September each year.

As part of its initiative to improve service standards, the tax department worked with the bodies to tackle some of the most aggravating issues, one of which was the way companies were hit by hefty fines out of the blue.

The issue has become increasingly sensitive as tribunals have taken to dismissing penalty levies where the judge thinks HMRC's approach amounts to revenue-raising rather than enforcing the deadline, as documented during the past year in AccountingWEB's Reasonable Excuse scorecard.

To encourage employers to comply with the 19th May PAYE filing deadline, Taxation reported a statement from HMRC and the tax bodies which said it will undertake to:

• Change the notification date for 2011/12 P35 annual returns from mid-February to mid-March 2012, so that employers will receive it much nearer to the end of the tax year.
• Annual return reminders will be sent out from 28th April 2012, where HMRC thinks there are outstanding P35s for the year.
• From 31st May 2012, HMRC will introduce a "P35 Interim Penalty Letter" that will go to employers within a month of the filing deadline.  The letter will tell employers they have incurred a late return penalty and explain what to do to avoid it increasing.
• Improve online guidance for submitting P35s online, 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.
• Instruct Employer Helpline staff to tell employers about filing dates when setting up new employer schemes, to help them avoid a penalty.
• For next year, improve the information on the P35 and the reminders to include a warning that the first penalty notice will cover four months.

"Taken together, these measures should help employers to avoid incurring unnecessary penalties and significantly reduce the number of cases where penalties in excess of £100 are charged." HMRC said.