Penalties for late P35 submission

by

Conor Kindel

A company or firm running a payroll must submit its year end forms (P35 and P14s) by 19 May each year. In the event the submission of the return is late then a penalty of 100 per 50 employees for each month or part month that the return is outstanding will be levied.

HM Revenue & Customs (HMRC) will send a penalty notice advising you of the total of thepenalty charge and explain the way it might be paid. If the return remains outstanding for more than four months then a penalty notice can be issued after 19 September and again the following January and May, if needed. These penalty notices will demonstrate the amount of penalty that’s racking up since the return hasnt actually been filed by the due date. In practice, if a business has neglected to submit the return the very first it is likely to find out about it is when a penalty notice for 400 is issued in September as HMRC do not routinely send out penalty notices previous to that date. This is widely felt to generally be unfair on organisations that have honestly made an oversight. If they had been made conscious of the problem within the first month of default and been issued with a fine of 100 then that omission can be fixed and even a more sensible penalty paid. Because of the the unfairness felt as being inherent in this penalty procedure a case (Foresight Financial Services Ltd v HMRC) has been taken to a Tribunal and a decision issued over the penalty that had been raised by HMRC for the late submission of a P35. The facts from the case are that Mr Owen, Director of Foresight Financial Services Ltd was informed of the fact that the P35 in relation to his payroll wasn’t submitted by 19 May following receipt of a Penalty Notice from HMRC in the sum of 400.00, dated 7 September. In a letter to HMRC, Mr Owen conceded that the P35 Return for 2009/10 was not sent in until 21 October 2010, although he believed it had been submitted before any deadline. He appealed against the initial penalty of 400.00 as well as an additional final penalty of 200.00 that was issued on 1 November. The Tribunal ruled that there was a delay in submitting the year end return due to the payroll processing of the enterprise without reasonable excuse and for that reason the criteria for HMRC to demonstrate that a penalty was due was fulfilled. HMRC then sought to impose the penalties according to their published guidance. However, the judgement from the Tribunal makes some interesting points about the penalty routine at HMRC. The Tribunal decision said there was conspicuous unfairness by HMRC in not submitting a Penalty Notice until practically four months after the P35 submission deadline. If the Penalty Notice was issued promptly right after the defaultwas first noticed by HMRC then the penalty would have been 100.00 and this might have alerted Foresight of the company’s non-compliance earlier. The Tribunal stated that there is a duty on HMRC to send out the initial Penalty Notice not more than Two weeks after the 19 May in each year. HMRC pc systems are capable of being set to notify VAT penalties and ought to be set in a similar way for End of Year Returns. In the case of Foresight, because of the the Tribunals findings, the charge was decreased from 600.00 to 300.00.

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Penalties for late P35 submission