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.

Payroll Year End

The 5th April is approaching fast and with it the Payroll Year End.  P35 End of Year Returns along with all attached forms have to be submitted to the Revenue by 19th May at the latest.

So ...  A few things to remember for the Year End procedures ...

• Almost all returns have to be submitted online this year, so if you are not yet registered to file online, now is the time to do it.
• A P35 must be completed for each company who has employees for whom a P11 is required
• A P14 must be submitted for each employee for whom a P11 is required.
• If you are not required to submit a P35 for the year (and you have a PAYE scheme set up), you must notify HMRC.
• Compare total PAYE & NIC due for the year against the amounts actually paid.
  If a balancing payment is due - this needs to be paid to the Revenue by 19th April
  If a refund is due - an amount of less than £500 will be allocated against the following year.  A refund can be requested for amounts over £500 once the return has been filed and checked.
• A P60 needs to be issued to each employee by 31st May

Payroll Year End and The Taxman Phones

Payroll Year End

With the tax year drawing to a close, employers will shortly be required to start preparing Employers’ Annual Returns (P35s) and P14s/P60s for all payroll schemes, in order to submit these by 19th May 2010.

These involve collating the date from monthly/weekly payroll runs into a summary per employee, as well as checking that all payments of liability have been made to HMRC. Personally, I have always found it useful to do a number of the checks and reconciliations for the Annual Return prior to running the March payroll, because then if you find any errors or discrepancies, these can be fixed within the payroll year. These issues could include: liabilities underpaid or overpaid to the Revenue; employees PAYE under or overdeducted; credit balances or online filing incentive still to be deducted from liability.

Remember that if you had less than 50 employees and filed your 08/09 return online by 19th May 2009, you will have been entitled to an incentive of £75 to be deducted from any liability due to the Revenue in 09/10.

HMRC’s online filing system is actually reasonably user friendly and takes you through all the information that is required to produce P14/P60s for each individual employee and P35 for the company. It is also possible to input the information, save, and make amendments to it, before submission.

Of course, payroll software packages such as Sage have a year end ‘wizard’ to lead you through the process.

The filing deadline is 19th May 2010, and barring a few exceptions, all employers will have to file these returns online.

If you have not yet registered for online filing, it is important to do so immediately in preparation for the 5th April 2010 year end. HMRC suggests allowing at least one week, as you need to wait for them to send out passwords. The link below gives HMRC instructions for registering.

File Online

If you would like us to prepare and submit these returns for you, or if you require any advice, please feel free to contact us.

Email

The Taxman Phones

HMRC ran over 200 staff training courses last summer relating to cold calling.

Currently, the most likely reasons for calls from HMRC would be Tax Credit claims and overdue tax payments. However, it would appear that this may be expanded to include questions about tax returns and general tax issues.

Genuine or Scam?

HMRC do not work 9-5, therefore they could be calling on evenings or weekends. How do you know if it really is HMRC?

Don’t give out your tax reference or NI number. Ask the caller to confirm at least the first few digits of either of these. If they refuse, or they get them wrong, discontinue the call.

Once you are convinced that the caller is genuine, you are still not obliged to talk to them if it is not convenient to do so. If you are not sure of the answer, simply say you will find out and get back to them.

You are within your rights to refer them to your accountant for any correspondence on the matter.