For some companies, the advent of Real Time Information over the next 12-18 months means this week will see the final performance of the annual P35 ritual where P35 returns must be submitted to HMRC by 19 May. Robert Leach rounds up some last minute advice.
Along with the company’s P35, a P14 must be submitted for each employee and some other documents. Penalties are imposed for any late filing. Under HMRC’s revised penalty regime, these can be up to £3,000.
To reduce the number of employers who were penalised for late filing in recent years, HMRC sent out reminder letters dated 29 April this year. Those who have already complied can ignore it. The letter advises, “If you have already filed your return online or told us that a return is not due, thank you; no more action is needed. there is no need to worry.”
The P35 return must be submitted on-line with a few limited exceptions. These mainly relate to domestic staff and certain religious organisations. If the P35 is sent by post, it should arrive by Friday, 18 May to meet the deadline. Note that if you send a paper P35 when you should file on-line, the return will be rejected and you will be regarded as not having submitted the form. This could lead to a penalty.
Subsequent PAYE deadlines are:
- 31 May 2012: The P60 certificate must be given to each employee. This is a copy of the P14 form provided to HMRC
- 6 July 2012: Deadline for sending the P11D and P9D forms to declare any benefits in kind provided to employees
- 19 July 2012: Last day for paying class 1A National Insurance for the 2011/12 tax year. (One further day is allowed if paying on-line).
If a return has been submitted on paper, you should not also send in a return online. If the form is not the P35 provided by HMRC, it must have been approved by HMRC. The P35 will only be accepted if signed.
Only one form P35 should be submitted for each PAYE reference number. Make sure you use the correct number, as some old PAYE numbers have been replaced.
P14 forms
The P14 forms must be those for 2011/12, as there have been some changes from previous years. Every form must record the employee’s name, date of birth, sex, and National Insurance number.
Remember that P14 forms must be completed for all employees whose details must be recorded on the PAYE payroll. This includes directors of companies, but does not include the partners of a partnership as they are regarded as being self-employed.
Labels and opaque correcting fluid must not be used on any tax return. If a mistake is made on a form, it should be discarded and a new form completed. If an amount is zero, the box should be left blank.
If you are one of the few employers who has used the National Insurance contributions holiday, another return must be submitted showing how much National Insurance holiday has been claimed. This return cannot be filed on-line; it must be sent by post.
Keep but don’t send
It is also a legal requirement that the employer must keep all deductions working sheets and records of payments to HMRC. These are either P11 cards and P32 booklet, or (more likely in practice), the equivalent computer file. These are not sent to HMRC but must be kept by the employer for any PAYE audit.
An employer must also keep, but not send to HMRC, any forms P38(S) or P38A. The former records details of students who worked during the three main holidays. The P38A records details of anyone who earned below the lower earnings limit for national insurance, and who therefore paid no income tax or National Insurance and earned no National Insurance contributions.
Errors
All boxes relating to pay, tax, National Insurance, student loan repayments and statutory payments must be completed. In the past, temporary National Insurance numbers were sometimes made up. These started with the letters TN. Such temporary numbers are no longer accepted.
A figure cannot be negative. The lowest figure that can be reported on a P35 is zero. Figures for earnings should be whole numbers of pounds. Pence are shown for amounts of tax and national insurance. The £ sign should not be entered on the form.
The correct National Insurance contribution letter should be shown for each employee. For most employees, this will be A, but do check. The letter X should only be used for:
- Employees paid below the lower earnings limit (which was £102 a week in 2011/12)
- Pension-only payrolls (for which letter C is wrong)
- Workers from abroad who do not pay UK National Insurance.
There are some obvious checks:
- “Tax in previous employment” should not exceed “pay in previous employment”
- If tax deducted in present employment is more than earnings, the excess cannot be more than “tax in previous employment”
- figures for employees on the P35 must agree with those on the P14
About 80% of P35 errors relate to names, addresses and National Insurance numbers. This year, HMRC is cracking down on improper payroll records.
According to the 2009/10 returns, UK employers employed 507 people called “AN Other”, 128 people with the surname “Dummy”, 572 people whose names comprised only a series of the letter X, 75 people called “Casual”, 824 people called “Unknown” and 40 employees who were apparently more than 200 years old. HMRC is getting less tolerant of such matters, and is likely to reject such returns and impose penalties. You have been warned.
Further reading
