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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: penalties: online filing


Regulation 205 of the Income Tax (Pay As You Earn) Regulations 2003 covers the ‘mandatory use of electronic communications’.

Regulation 206 provides the information about those that are not specified employers for the purposes of electronic communications.

Regulation 207 provides the meaning of ‘specified information’. Which, in practice relates to forms P35s and P14s.

Regulation 208 provides the meaning of an E-filing notice which HMRC has to issue to a specified employer for a tax year for which they are required to file returns electronically.

An employer may appeal this notice on the grounds that

  • they do not meet the criteria for a specified employer, or
  • they are exempt by virtue of regulation 206(2).

Employer Requirements {#IDAV0TOE}

From 2004-05 (return due by 19 May 2005) employers with 250 or more employees have been required to file the returns electronically for this and subsequent years.

From 2005-06 (return due by 19 May 2006) employers with 50 or more employees have been required to file the returns electronically for this and subsequent years.

From 2009-10 (return due by 19 May 2010) employers with fewer than 50 employees will be required to file the returns electronically for this and subsequent years.

Employer Incentives

Small employers (0-49 employees) are being offered incentives to encourage them to use online filing to file their annual returns.

Both form P35 and forms P14s must be filed on line to qualify for an incentive payment.

The incentive payments are as follows

  • 2004-05 - £250
  • 2005-06 - £250
  • 2006-07 - £150
  • 2007-08 - £100
  • 2008-09 - £ 75

The incentive is given by BROCS as a credit against the account during the year in which the return was successfully filed online, not the year to which the return relates.

Note: Some employers that would ordinarily have registered as a ‘simplified scheme’ COG914010 have registered (or have been registered by payroll agencies) as ‘ordinary’ schemes in order to benefit from the incentive payments.

If you encounter such situations you should consider penalties for returns filed late in the normal way.

Penalties {#IDAD3TOE}

Regulation 210(1) provides for a penalty if an employer fails to deliver specified information or any part of it.

The penalties are based on the number of P14s included within the return. See attached table of penalties (Word 33KB)

Action by Caseworker

Where you encounter an employer who has been issued with an E-filing notice but

  • has failed to comply with the notice, and
  • penalties have not been issued automatically via ECS, or
  • the penalty has been vacated or stood over, and
  • you have established they are correctly due

you should

  • encourage the employer to file the return online, or

    • if the employer is encountering serious difficulties in doing so
    • establish what the difficulties are and what assistance can be provided to rectify the problem, for example ‘helpdesks’
    • as an absolute last resort a ‘paper’ return may be accepted
  • calculate the penalties in accordance with the above table
  • include the penalties in a Class 6 contract settlement, and
  • advise the processing office that you have settled the penalty due with the employer.