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P11D logjam unleashes flood of penalty warnings

HMRC has been issuing warning letters about penalties for late filing of forms P11D and P11D(b) for 2019/20, despite receiving the required forms in most cases.

11th Aug 2020
Tax Writer Taxwriter Ltd
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The deadline for submitting the returns of expenses and benefits (form P11D), made available to employees in 2019/20 was 6 July 2020. Employers also need to file a return of class 1A NIC due on those benefits (form P11D(b)) by the same date. Any class 1A NIC due must be paid electronically by 22 July 2020, or by cheque by 19 July 2020. 

Automated or paper?

Most employers submit the P11D data to HMRC using one of three online methods:

  • The employer’s own commercial payroll software 
  • HMRC’s PAYE online service
  • HMRC’s online end of year expenses and benefits service – an interaction PDF form.

All of the above methods should allow the data to be received and acknowledged by HMRC with no human interaction.

However, employers can still download the P11D and P11d(b) forms, print and complete by hand, then post to HMRC. This paper option is by far the riskiest in these Covid times, as Royal Mail is taking longer to deliver physical letters and there are less staff in HMRC offices to open and process the post when it arrives.  

Coronavirus support

HMRC staff has been working incredibly hard during the coronavirus pandemic to help businesses using the coronavirus support schemes and those who need to negotiate time to pay agreements for tax due. This has meant that staff have been redirected from processing of P11D forms to frontline business support work.

The result is that HMRC is up to eight weeks behind where it would be in processing P11Ds and P11D(b)s. The physical forms have not been logged as received, and it’s not clear whether the online PDF forms have been processed either. The consequence is that the HMRC computer is churning out penalty warning letters saying the forms have not been submitted.

More work for HMRC

These incorrect warning letters have created frustration among employers and agents who are concerned that the forms may have been lost in the post.

For example, AccountingWEB member Southwestbeancounter received a P11D penalty letter for forms submitted on 6 June, although the cheque enclosed in the same envelope had been cashed.  

Communication breakdown

HMRC has received a lot of calls on the topic, but it has not made a public statement or communicated the problem to the professional bodies.

PAYE guru Kate Upcraft commented: “I am sympathetic to the backlog and the fact that an automated IT routine [sending the warning letters] has not been spotted. What is disappointing, is that the wider stakeholder community have not been told about this when HMRC clearly know, as the large Business Unit and CCMs have been telling employers what has happened when asked.”

Knock-on effect

The processing of P11D forms has an important role to play in ensuring employees pay the right amount of tax on their benefits at the right time.

The information reported on P11Ds is used to change the employees’ PAYE codes as part of the dynamic coding system. If this process is delayed there is less time left in the tax year 2020/21 to collect any additional tax due on benefits. PAYE codes can not be altered to collect in-year tax due for 2020/21 after 30 December 2020.

Replies (6)

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By Paul Crowley
12th Aug 2020 01:25

Add this to SEISS error letters and it is clear that HMRC are not open in admitting errors in HMRC systems. I can remember the CIS penalty avalanche when there was a system change and one of my clients received £60,000 late filing of CIS penalties. HMRC refused to speak or reply and finally agreed appeal less that 5 days before the tribunal date.

Thanks (4)
By Nebs
12th Aug 2020 10:06

HMRC should be fined £100, payable to the affected "customer", every time they made a mistake like this.

Thanks (4)
Replying to Nebs:
By Paul Crowley
12th Aug 2020 10:39

The country would be broke.
I vote it all goes into a seperate fund for buying an aircraft carrier. We have 2, Australia has 2. Surely we should outgun the aussies

Thanks (3)
By turchyna582
12th Aug 2020 11:02

Why cannot Tax Codes be changed at any time, to collect any PAYE tax liability for any year (subject to appropriate safety 'caps'). Surely the fact that RTI is submitted every payroll run, means that data is live and current - or was the RTI system simply to avoid the delays caused by awaiting the historic P32 postal submission before implementing recovery action?
My wife has a part time job in addition to her full time job - HMRC have known this for almost 3 years; with respective Employers being fully compliant with their RTI's and implementation of Codes issued by HMRC.
HMRC have persisted in using BR w1/m1 instead of using an appropriate K code; resulting in very large demands supported by P800 Forms issued last week for 2019/20. The K codes could have been implemented in 2017/18 or 2018/19 or 2019/20!
Are they all numpties ?- some of my grandchildren (still at school), could easily have seen that the BR w1/m1 code will only deal with the present year liability in that one employment!

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Replying to turchyna582:
By Nebs
12th Aug 2020 22:42

They don't want you to pay the right amount of tax. Imagine how many jobs would be lost and penalty opportunities missed if everyone paid the right amount of tax.

Thanks (1)
By AndrewV12
14th Aug 2020 10:54

'However, employers can still download the P11D and P11d(b) forms, print and complete by hand, then post to HMRC.'

Interesting that one about paper forms, in my experience HMRC no long accept or approve any paper forms, bar 64/8, even though they say they do.

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