2006/07 interim penalties for outstanding PAYE End of Year Returns

After the stinging criticism levied earlier this year when the 2005/06 penalty notices were issued only after large penalties had already accrued, HMRC plan to issue this years notices rather earlier.

From 24 September they will be sending a penalty notice to those employers who they believe have not yet submitted their 2006/07 Employer Annual Return (P14s and P35) and, where due, their 2006/07 Contractor’s Annual Return (CIS36).

They are already issuing penalty notices to those employers who have filed late.

In the previous two years they have not issued penalties until late in the annual cycle because of processing problems, but recognise the benefit to employers and their agents of doing so as early as possible. They hope that their plans for this year will help employers and agents to identify any instances where they have overlooked filing, or where there are other problems with their Return.

2006/07 returns were due by 19 May 2007. The penalty is £100 per 50 employees and/or subcontractors for each month a Return is outstanding as at 19 September 2007.

An employer who believes that the penalty notice is incorrect should contact HMRC. Any appeal should be made in writing to the office stated on the penalty notice, giving their reasons. Any outstanding Return should be sent as soon as possible.

Employers with 50 or more employees should submit the Returns online to avoid a non E-filing penalty also being charged. 2006/07 CIS36 Returns can however only be sent on paper.

HMRC also want to hear from any employer who has not sent a Return because one was not due. For example, if there were no employees liable to PAYE or NIC during 2006/07. We can then update our records to prevent further penalties being issued.

Some employers may think they have submitted their return because they received an acceptance message from a test return filed online. HMRC cannot accept test returns as the final return. In 2005/06 the wording of the ‘Government Gateway’ acceptance message led some employers to mistakenly believe that what they had submitted as a test had been accepted as the final return. Because this message caused some confusion HMRC agreed to discharge penalties that had been charged in these circumstances once they had received and processed the actual return. For 2006/07 they have changed the message transmitted by the ‘Government Gateway’ to make the position with test returns clearer, which should reduce the number of problems this year. Where only a test return has been submitted, employers must still send the actual return.

Further penalties will be issued in January 2008 and May 2008 to those employers who have still not filed or not advised HMRC that a Return will not be due from them.

14 September 2007