P35 Penalty Determinations

About the Clerk, you said "I can't say that he wasn't neutral.
His stance on the fact that there were many others with a similar experience to ours was that they were there to judge our case, not others."

To my mind, he was showing a lack of neutrality there.

I think the bigger issue here is that we ought to start getting back to basics. The Revenue have powers to issue penalty notices in cases where certain documents etc HAVE BEEN RECEIVED LATE. That essentially is what the law says, does it not?

It follows from this that they have no powers to issue penalty notices in other circumstances. Yet this is what they do, nevertheless. I feel that we as a profession are failing to respond in a coherent and assertive way to this situation. In cases where we think they're wrong we should be consistently calling on the Revenue to provide evidence that the document was received late.

Please, anyone, correct me if you think I'm wrong, but it seems to me that the Revenue have, over a period of time, been withdrawing any systems which they might have had to record accurately the date on which a piece of paper was received into HMRC (even if it was only at the postroom). The date on which someone takes note of that piece of paper gets recorded, but of course that can easily be much later.

The burden of proof ought to be on the Revenue here, and are we not letting them get away with it too often?

When something is late, then fair enough, but when it is not, why should the taxpayer suffer, especially because he may well be suffering because of inadequate HMRC systems?

We recently lost a Commissioners' hearing for a £500 penalty. If the HMRC inspector refuses to reduce the penalty the Commissioners have no power to do so.

Again HMRC effectively claimed that their system was perfect and "had no recollection" of the system failure on 17 May 2007. My impressions are that the clerk acts as an advocate for HMRC. From the start the Commissioners ( of which there were two, one of whom said nothing throughout the proceedings) asked if I would like HMRC to present first but the Clerk decided that I should present first. At one point the HMRC inspector stated that he thought there was a recent court case in their favour, but could not name the case, this still appear to be taken as fact. In fairness to HMRC I may well have overlooked this filing and they could well be right that it was late, but why £500? I have decided to look upon this as a “consultancy fee” to improve our IR35 admin, but with the incentive being lower this year I am minded to resort to paper filing until forced to file electronically, surely not what HMRC want agents or employers to do? We need to consider the risk/reward ratio for clients: £100 online filing incentive versus the possibility of £500 or more penalty.

My view is that HMRC underestimated the cost of the online filing incentive due to the high take up rate and are using P35 penalties to subsidise this. I don't think I will bother with the commissioners again better results are likely to be achieved via the Adjudicators office.

Perhaps we should all be writing to “Working together” perhaps a large number of complaints on one issue will jerk HMRC’s conscience, but I won’t hold my breath.

We had a similar situation. A penalty notice and an acknowledgement email in our possession.
HMRC quickly withdrew the penalty but would not issue the incentive.
The problem was an IT issue and they could not issue an incentive until the IT had been sorted out.
I raised this at Working Together recently and made the point that we could not blame failings in our systems but it was OK for HMRC to hide behind their failings.
Even HMRC staff agreed with the accountants on this one and the matter was escalated.

... thanks for your detailed notes. I'm interested to hear about the Clerk's comments. I thought the Clerk was supposed to be neutral.

Do you fancy giving us a few more details? Was this a straight case of HMRC computer error, why did they deny it?

Much appreciated.

Many thanks Michael. This concession is at least worth a go!

just the Revenue!

I received one recently for a new client who was an employer at 5.4.06 (single person company), but had not paid himself any wages. Nothing to suggest that a P35 was due, other than a determination for £900. Needless to say, a letter went back the same day.

However, I've not received any for clients that I submitted on line for.

One of our clients, who submitted his own P35 online and had the same experience as we did, has just phoned us to say that his PAYE district has confirmed (verbally) that his £900 penalty will be waived and, if he resubmits his P35 online, he will not lose his online filing incentive.

He's still not happy because it means restoring from backups etc, but it's better than originally envisaged.

Just found this on HMRC site:

2005-06 interim penalties for outstanding Returns: update
We are sending penalty notices for outstanding 2005-06 Employer’s Annual Return (P14s and P35) and, where due, a 2005-06 Contractor’s Annual Return (CIS36) from 18 March and not 12 March as originally advised. We are sorry that we are issuing these penalties later than planned.

2005-06 Returns were due by 19 May 2006. We are sending an interim penalty of £100 per 50 employees and/or subcontractors for each month a Return is outstanding, as at 11 March 2007.

You may think your penalty is wrong. For example, your PAYE scheme ceased before 6 April 2005 or you did not have any employees and/or subcontractors during 2005-06, or you believe you have sent your Return.

If you want appeal against the penalty notice, you must write to the office shown on the notice stating why you think the penalty notice is wrong. Because we are issuing these notices during the week ending 23 March, we will accept your appeal if made by 23 April.

We still want any outstanding 2005-06 Returns as soon as possible if they are due.

Thanks to all who replied to this post...It certainly looks like I'm not alone then!

Any suggestions for suitable wording for appeal letters will be gratefully accepted!

A client who has had no employees and therefore thinks he doesn't need to send in a P35 shouldn't receive a penalty notice for £900 as the first contact from the Inland Revenue. Too heavy handed and simply upsets clients, who then rant at agents. Result - misery all round. Another HMRC own goal.

First I've heard of this happening for 2005/6. I know they had a big problem in 2004/5 cos I got 32 all on the same day!

Luckily they were all from the same district so I did one covering letter, a list of reference numbers and then photocopied all of my acknowledgements. Never heard anything else.

These things all seem to be dated the 12th of March, but are only now thudding on to our doormats 12 days into the appeal period, which runs from the date of issue. The notices are obviously not issued on the 12th of March at all, but I don't suppose we have any redress against the Revenue for that. I can't see them being too sympathetic if we accountants miss the deadline (we could have been off on our holidays for a fortnight or so from say last Friday, and would therefore have known nothing about these penalties until it was too late).

Nor would any of us dream of pretending, as the tax office are doing, that a letter was sent on a certain day when it wasn't, and eventually sending it out when we feel like it in an envelope without a dated postmark.

One rule for them and another one for us.

I got a client on the phone this morning who had just received a determination for £900 too. More to the point, it was for a duplicate reference that they don't use, and dated 0506 - before they actually became a Ltd Co!
I shall be writing a suitably toned letter, as this is just ridiculous.

I'm glad we're not the only ones, though.

I'm not in the office today so god knows what's waiting on Monday, but I've had one for my partners business for £900 come to my home address.

Glad I'm not the only one though as I've been frantically looking in the loft for last years payroll records, which doesn't help as we've moved in the meantime !

Yes, we have received several. All are for ones that we e-filed apart from one that was for a business that had closed the previous year. Don't know whether appeals have been accepted yet, but what is point of e-filing if they are still raising penalties months after delivered!

Don't suppose they will accept our fee for £50 for appealing against each return!

We received a demand and luckily had the electronic submission data to hand.

Do all these arrive from one Tax Office ? Ours came from Centre1.

On the subject of P35s is it only us to have only received about 50% of those expected for 2006-7? Most of those missing did send in a P 35 last year with payroll details (not nil returns)

I think it is outrageous that the first you hear of the penalty is when it has clocked up to £900. If the penalty was correct and you had genuinely forgotten to file the return (or thought you had done it but for some reason it was wrong etc etc) I think it is very wrong that the first time you get reminded about it is when the penalty is already at £900. I don't think the initial penalty should be able to increase above £100 until the first reminder has been sent out. Then if it goes up by £100 per month after that at least you have been warned. I bet they would get the notices out a bit quicker then. They usually manage to issue the self assessment penalties pretty promptly. Why can't they do the same for payroll???
And yes, I have had two for two of my clients this week, both incorrect. Expecting more over the next few days...

I have received a notice this morning for a nil return sent on the 6th April, I think that it is totally ridiculous that the revenue can simply wait nine months and issue £900 bills without prior warning, surely they have a duty to provide a better service than this? Is this simply a ploy to turn a £100 penalty into £900 and receive more revenue? How can the revenue justify this?

What is the true cost of this ball's up going to be, assuming that everyone in their right mind is going to appeal against this, surely the revenue have better things to do than go through god knows how many thousands of appeal letters because of their own incompetence.

Has anyone got any suggestions on how to politely phrase an appeal letter, I think I’m still far too p’d off to start!

Is this a case for joint action by all accounting web members to
submit with the appeals, all the postings from members of this site ?
We cannot all be wrong. It will be interesting to obtain feedback of how the different districts handle appeals when a nil return should have been submitted but was not because the client,not having any employees, did
not think that a return was due.I am in the unfortunate position of having hand delivered one of the a returns(because the IR computer kept rejecting it)that has incurred a £900 penalty
In the bright and happy past a nil return meant no penalty but this is apparently no longer the case.

We have received a number of these £900 penalty notices, some of which relate to nil returns as notified to HMRC last April, so I'm confident we can appeal against these.

We have a couple however that our records show were filed online, but we cannot find a receipt. These were filed by an ex-employee, who is not around to ask what happened last April.

Can we at least appeal against the amount of £900 as, if HMRC were working efficiently, we would have discovered this error much sooner and presumably would only have a £100 penalty to pay (they do this very effectively for tax returns!). One client only had a £35 PAYE liability, so £900 does seem rather disproportionate. Can we appeal on these grounds?

Lots of £900 penalties. So far it looks as though only one of them is correct. The majority of clients either filed on line themselves or we did it for them but at least one was submitted manually.

If HMRC are going to be wading through appeals for the next few weeks/months what will be the next thing to be neglected....

I've received a few more today, all online returns and some clients have received them direct although we are the registered agent for PAYE.

I've spent the majority of yesterday and today going through files, writing appeal letters and dealing with understandibly irrate clients.

Also received a notice asking for details of an employee leaving who has not left as well as the "important dates" for newco's with the wrong accounting dates for the second time after the revenue have been informed of the correct accounting dates.

But my major gripe today is a £900 penalty that I received for a client who's P35 was returned with a letter sent to HMRC cancelling the PAYE scheme and the PAYE scheme was subsequently cancelled.

We should be able to invoice the revenue for all the time we have to spend sorting out the cock ups they make.

On top of all that the delay in responding to any of my letters is totally unreasonable, taking up to a month for something as simple as a copy 64-8!

I have absolutely no confidence in dealing with HMRC and I'm sure I'm not alone, if it was the clients or the profession dealing with tax affairs this way the revenue would see this as totally unacceptable.

It certainly does seem like one rule for them and another for everyone else.

Does anybody regulate these guys? Who can we complain to about them?

And as for the nine month wait before sending out the penalties, the law should surely prevent them from doing this?!

I thoroughly enjoyed having my rant, thanks!

One wonders if these £900 bills are an attempt to improve the appearance of the Revenues own accounts so close to their year end?

So much money 'owed' to the Revenue.

They won't be rectified until after 5 April but in the meantime they appear to have met targets on tax take?

Or am I just becoming cynical in my old age lol!

and of course by the time they sent the demands out, a further two months has passed and the penalty is now up to £1,100

If all else fails, then the Employer Compliance Handbook states...

"By concession the penalty is ‘capped’ to the total liability returned, subject to a minimum penalty of £100."

Mine all came from North East Metropolitan.

Some for companies not even formed in 2005/06..

The remainder all e-filed.

Appeal letters sent today.

In answer to Richard, the penalty has no bearing on the tax due, only if P35 not submitted on time. However, a few months ago I appealed against a number of similar penalties, genuinely issued by HMRC, and got all the penalties waived! As my Dad used to say 'if you don't ask, you don't get!'

Yes we've had about a dozen - some were filed and some didn't start trading until 06/07.

However, check the wording on the notices - we've had some penalties for employers that HMRC think should be submitting a CIS return as well as the P35.

If they haven't got the P35 then the penalty notice says that a return under Regulation 73 Income Tax (PAYE) Regs 2003 was required.

If they are expecting a CIS return then the return is under Regulations 11 and 40A of the Income Tax (Subcontractors in the Construction Industry) Regulations 1993.

The penalty notices are exactly the same apart from these references.

At the moment we are dealing with several of these plus £100 penalty determinations on each of the members of a partnership that was incorporated several years ago (ie ceased to exist) and one on the trustees of a trust that was wound up in a previous millennium.

We spend increasing amounts of time wiping HMRC's bottom.

Nobody pays us for this of course.

Apologies, but I've justed posted separately on this site before spotting this posting.

It's that infernal 'test' button used for the first and, I understand, last time in 2005/06 for online P35s. It would seem that the button was set to default to 'test submission' so the box had to be unticked in order for the submission to be recognised as 'actual'. This was perhaps not the cleverest idea HMRC ever had. Or perhaps it was; presumably the £250 online filing incentives are also at stake here!

Clearly a number of things have gone wrong, including possibly:

The existence of the test button not being sufficiently publicised;
The test button being det to default to 'test' as above;
The acknowledgements from HMRC being exactly the same for a test submission as for an actual submission;
The nine-month delay in alerting the taxpayer (at £100 per month);
Software companies possibly, allegedly, whatever, not drawing sufficient attention to the issue.

All in all, it doesn't exactly encourage us to file online! Personally, I can't see the penalties sticking. I suspect that being in possession of an e-mail acknowledgement stating 'your submission has been received and is being processed' will be accepted as evidence of submission. Won't it?

I'm going to lie down.

(Still) Confused of Dorking

Ours is for a company that is dormant and, as we have notified HMRC on a number of occassions, currently has no employees. We weren't sent a p35.

Such is the decline in the relationship between the profession and the Revenue that we are seeing people asking questions like this:

Is this an HMRC scam?

How very, very sad for all concerned.

The aggressive, unhelpful, and incompetent behaviour of HMRC has deteriorated to such a level that it is becoming impossible to communicate with HMRC on a sensible basis.

Their computers continue to churn out reams of incorrect notices with the onus on accountants to waste time writing back to remedy the situation.

Surely in instances such as the mass issue of such notices the 'Professions' should stand up for their members by advising HMRC in the strongest possible terms that it is totally in the wrong and not to issue any more penalty notices until it gets its house in order.

Accountants in general are doing everything possible to assist in getting their clients to file forms by required deadlines but HMRC seem to want to trip us up and penalise at every opportunity.

This is the sort of thing that our professional bodies should be campaigning about, but I'm not holding my breath. It seems that they are only interested in larger things.

If all firms affected complained to their MPs and the Chancellor of the Exchequer they may have more effect than complaining to the institutes. If an MP cannot get satisfaction they can refer the matter to the ombudsman. At least this approach will raise the profile of the many problems at the Revenue outside of the rarified atmosphere of the institutes and this (excellent) newswire.
Richard

Monetary incentives (or the lack of them) really have an effect. If HMRC had to compensate the taxpayer say £50 for each and every notice wrongly issued (ie without proper authority), they would soon stop doing it.

Now why didn't we get THAT put into Carter?

I received a penalty notice on 23.03.07 for a client where we had only filed a P38A (no PAYE/NIC deductions due) as this was all our software would allow at the time (due to a bug). I filed the P35 on-line using the Revenue software that same day, received an email almost immediately showing it had been done successfully & later an email to say the client could claim the £250 filing incentive! Hopefully this will offset the £100 penalty (assuming it gets reduced to this).

Is it still possible to file 2005/06 online?

A number of posts have suggested invoicing the Revenue for time spent dealing with thier cock ups.

If it can be shown that the additional costs to clients were as a result of mistakes by the Revenue then I see no reason not to make them pay. However the Revenue will not pay you directly.

The steps to follow are:

1 Invoice client for additional time spent dealing with Revenue mistakes.
2 Receive cheque from client for payment of invoice (at this stage I would suggest that you do not bank the client's cheque - it should not be possible to bank the cheque if the client decides to post date cheque in pique at having to pay your fees!)
3 Write to Revenue with copy of invoice telling them that client has sent payment for invoice (not a lie even if the cheque were post dated)
4 Wait for Revenue to send refund to client
5 Bank cheque from client.

No one is out of pocket at any stage and clients like to feel they are getting one back at Mr McStalin

This works as I have used it on other matters.

HOWEVER - points to note:
a Revenue will only pay if it WAS their mistake
b They may kick up and tell you that they will not pay client - quote taxpayers' charter at them
c If they really won't pay don't cash clients cheque - issue credit note - what have you really lost.

AND FINALLY

The Revenue may only pay your client the net amount of the invoice as they can recover the VAT (as long as they are VAT registered) - don't worry, nothing lost in the long run.

Roll on 18 months and Carter proposals - I can't wait!!!!!

We received some for dormant and ex-companies. We don't intend to do anything but will simply have a chat with the nice man from the Collector's office when he comes knocking. I think the Collector's are getting as fed up with the inefficiency of the Inspectors as we are from recent conversations I've had with doorstep knockers!

The Revenue are ignoring me!

Neither I nor any client has (yet) received a single late filing penalty out of the 60 or so 2005/06 P35s that we filed online last year. Am I riding for a fall?

For the record, we used IRIS software in live mode (I did not even know there was a test mode) and most of our P35s go to Lothians or Kent.

Just spoken with the Revenue. Nice Lady.

Sadly what I learnt is probally the way of the future. All enquiries regarding the P35 penalty pigs ear are fielded by one office in Scotland, that is for the whole country.

She told me that since last thursday they have had 200 people answering the phones 8 till 8 Mon to Fri and 8 till 5 Saturdays and when we spoke there were 55 outstanding calls waiting to be answered.

She had been preped about the extended appeals deadline and to look at the website, but I pointed out to her that most agents were getting data ready for this years P35.

As an aside when I said I had a lot of missing P 35s she did not seem suprised!

I've received notification that my penalty for the company with a nil return has been reduced to nil. No explanation, just time wasted and accountants' time incurred.

Have you seen this article on the topic too?

Mitigating 2005/06 penalties

This is clearly a cock-up that cannot be blamed on test submissions alone.