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 DAVID J. COX

Accountant & Tax Consultant

Telephone 01323 412191 Fax 01323 400070 Mobile 07540 394018 mailto:david@davidjcox.co.uk

PAYE penalties update: HMRC apologise and offer some guidance

”We are sorry for the delay and errors, especially at this busy time of year for everyone involved with payroll work. - HMRC Working Together.

Following the recent wave of late issued 2005-06 Employer Annual Return and Contractor Return penalty notices HMRC has at last stepped in to partly diffuse the situation by giving some guidance, explanations and to apologise to payroll e-filers. Penalties will not apply to those who filed test returns thinking that they had made a valid submission. The deadline for outstanding appeals is also to be extended from 23rd April to 30th April.

HMRC points out that the penalty issued of £100 for every 50 employees and/or subcontractors for each month a return is outstanding (£900 to date in most cases) is based on information received for previous years, i.e. the penalties are not final because they cannot be determined until a return is physically filed. A penalty will not apply if a return has already been validly submitted, and will also not apply if there were no employees.

The reason given that 2005-06 interim penalties were issued so late is given as “we wanted to ensure that we had taken account of any returns we are still working. We took the decision not to issue 2005-06 reminders for the same reason. That work required extensive analysis of our various systems. The delay and this analysis has enabled us to avoid issuing a penalty notice for any unprocessed returns.”

A large number of employers are maintaining that a penalty is not due because returns have already been submitted. HMRC seem to be in the dark about what has happened in some cases and says “We want to use employers’ experiences to understand the reasons for this and avoid a repeat in future.”

Some of the specific problems have already been identified:
 

bullet About 600 cases where a penalty was issued because HMRC’s systems did not correctly record CIS 36 details.
 
bullet A number of cases where a ‘test’ return was the only one submitted. The wording of the ‘Government Gateway’ acceptance message may have led some filers to believe that what they had sent as a test had been accepted as the final return.

HMRC say that these cases ”cannot be readily identified so employers in this position have to appeal against the penalty in writing and send in the actual return (sending it online if they have 50 or more employees) in support of the appeal as soon as possible. In these circumstances we expect to discharge the penalty once we have received and processed the actual return.”

While HMRC continues investigating its general advice to those employers who believe the penalty is not due remains the same: they must appeal in writing to their HMRC office saying why they think the penalty is incorrect.

UPDATE. All of our clients has now been sorted.