HMRC Penalties

HMRC Penalties

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I have a client (Ltd Company) who registered as an employer because expenses were paid out on behalf of sole employee.  Registration was applied for and completed in November this year but backdated to 5th April 2010.  The expenses paid out were all allowable against tax and therefore a nil P35 return was submitted for 2010/11. We have just received notification of £100 penalty for late return as it should have been due by 19th May.  I think this is unfair as we only received the P35 in November so how could it have been returned sooner.  Granted the mistake was in not registering sooner, the client did not approach me until November to do the accounts for the year ending 31st March 2011.  Is this getting off lightly or could he appeal on the grounds that he wasn't aware he needed to register until he obtained advice.  I would appreciate comments and opinions.  I have never dealt with an appeal.

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By Monsoon
16th Dec 2011 14:09

Late P35

You can appeal if you have a reasonable excuse.

Not knowing you have to register and then registering late isn't a reasonable excuse, in my mind.

However, I believe you can get a P35 penalty reduced to nil if it was a nil P35.

I'm confused though. Is the £100 penalty definitely for the late P35? As by November, it's more than 1 month late and the penalty is £100 per month, not a flat £100.

 

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By carol_ine
16th Dec 2011 14:20

Sorry the information supplied was incorrect.  A P11D(b) was completed (no class 1A NIC due) but no P35 as there were no payments of salary and therefore no P11 completed.  the P35 states that the P35 is required "if you had to prepare a P11"  - should a nil return have been filed?

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
16th Dec 2011 14:29

Then I'd appeal

I'd appeal on the grounds that it was a nil return. They usually accept those appeals.

I'm still unsure why it was only a £100 penalty though.

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Euan's picture
By Euan MacLennan
16th Dec 2011 14:38

Doesn't make sense

Why would you register for an employer's PAYE scheme if you were just paying expenses, not wages?  Or did you do it so that you could file form P11D, Return of Expenses & Benefits?  Are you sure that it was a nil P35 that you submitted late and not a nil P11D?  But then, it would not have been a nil P11D as you had some expenses to report or have you not submitted any P11D?

Why would you submit a nil form P35?  Most payroll software will not allow you to do it unless you have an employee who is paid some wages.  You should have notified HMRC that no P35 was due, which you could have done online.  Normally, if no P35 is due, no penalty can be imposed, but you may have shot yourself in the foot by submitting a nil P35.

[EDIT]  I was called away while typing my reply, but I see that the thread has moved on.

It may have been a P11D(b) showing that no Class 1A was payable, but it was not a nil P11D if it showed the expenses.  By all means, appeal, but I think it was naive to apply for a PAYE scheme to be set up for the previous year just in order to report some expenses with no tax or NIC consequences.

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By carol_ine
16th Dec 2011 14:39

The registration was done so that the return of expenses for the Director could be filed.  The P11D(b) was submitted, but no class1A NIC was due.  No P35 was submitted as one was not due.  Should I go on line now and report that a P35 is not due and would that mitigate the penalty?  The penalty notice does say that penalties are £100 for each month and that they have been charged from 20th may to 11th november but the total is only £100 - confusing!

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Replying to DJKL:
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By carol_ine
16th Dec 2011 14:56

I have just realised what has happened.  I did in fact report online that no P35 was due and this was done on 11th November (just found the e-mail confirmation).  The penalty is therefore from 20th May to 11th November as abviously the notification that no return was due was late.  As the company did not register as an employer until then (all be it a late registration) how could they be expected to submit a return they hadnt received notification to submit?  Is an appeal likely to suceed or will the HMRC insist that (as has been pointed out) not knowing they needed to register is not a reasonable excuse.  also the £100 does seem reasonable when they could charge £100 per month - should they just pay up and shut up? 

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Euan's picture
By Euan MacLennan
16th Dec 2011 15:05

Makes even less sense

Since the penalty notice refers to the period from 20th May, it must mean the P35 which was due on 19th May, but which you say was never submitted.  You don't appeal against the penalty - you write a letter of complaint stating that no P35 was due or was filed and that HMRC has imposed a penalty for which there is no basis in law and demand that they cancel it.  In the meantime, there is no harm in notifying that no P35 was due - it is not a requirement, but is supposed to stop HMRC from issuing penalties when no P35 is due and will provide corroboration when they check out your letter of complaint.

However, I think you are liable to a penalty for the late filing of the P11D - I would just keep my head down on that one.

[EDIT] Crossed in the post again!  Might I suggest that you get your facts straight in your question in the first place.  However, my advice about a letter of complaint stands.  There can be no penalty if no P35 was due and there is no penalty for complying late with an administrative confirmation that has no force of law.

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