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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: penalties: failure to submit an end of year return (P35/CIS36) - first 12 months of lateness

Section 98A(2)(a) TMA 1970

See COG914290 regarding the application of Section 98A penalties for failure to submit CIS monthly returns from 6-4-2007 to 05-10-2011.

Although penalties for the first 12 months of lateness are routinely dealt with by End of Year Sections with the support of an ECS programme you may still become involved.

Your involvement in these penalties will usually be

  • where any case considered for a compliance check indicates that returns have been submitted late and not had penalties issued or have had them incorrectly inhibited, or
  • to those cases where RIS has to
  • open a new scheme or
  • re-open a permanently cancelled scheme

for the compliance check to take place or where

  • the scheme has been closed one year only (COYO)
  • and you discover that the employer/contractor has failed to submit a return.

However you should

  • make sure that penalties have been considered in any case where you identify that there has been a failure to submit a return by its due date.

Where you pursue this penalty you should make sure the EOY Section does not duplicate it.

Note: These penalties are fixed in legislation and must be pursued in all relevant cases. Reduced amounts can not be negotiated as part of a contract settlement. If the employer claims to have a reasonable excuse - COG914065.

All late returns obtained during the course of an EC compliance check must be sent to the EOY section to make sure individuals’ details are captured.

The penalty is fixed at £100 per month or part month for each batch or part batch of 50 employees/subcontractors. For example,

A form P35 return of 53 employees which is late by 4 months 15 days.

The penalty is £1,000, that is

50 employees (1 batch) at £100

3 employees (part batch) at £100

Total £200

£200 x 5 (4 months + 1 part month) = £1,000.

By concession the penalty is ‘capped’ to the total liability payable by 19th April following the end of the tax year, subject to a minimum penalty of £100.

Thus in this example if the return remained outstanding for 11 months the penalty would have increased to £2,200. However, if the total liability payable was only £1,700 the penalty would be ‘capped’ at £1,700.

If the failure goes beyond 12 months then in addition penalties under Section 98A(2)(b) may also be considered - COG914050.