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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: penalties: raising formal penalty determinations - daily penalties and penalties for failure to submit a return (P35/CIS36/P11D(b) - (first 12 months of lateness)

COG914180 explains the initial action to be taken on all cases when raising formal penalty determinations.

Wherever possible penalties for failure to submit a return should be either

  • included in a contract settlement,
  • included in a formal penalty determination, or
  • issued by the appropriate IT System (ECS or CISR - Note: from October 2011 we can no longer issue automated Section 98A penalties for late CIS returns via CISR).

When proceeding to raise formal penalty determinations for

  • daily penalties following the determination of an initial penalty by the First-tier Tribunal (COG914185 - Raising Formal Penalty Determinations - Initial Penalties arising under S98(1)(a) or S98(1)(b) TMA 1970) or
  • failing to submit a P35/CIS36/P11D(b) return (First 12 months of lateness) (see COG914290 for late-filed CIS300s due from 06-04-07 to 05-10-11).

You will

  • complete an AO Report Form - Authorisation Stencil (available via SEES - forms and letters)
  • complete a 394 (IT/CT) (COG914200 - Class 1A NIC - Prior to 2000 - 2001) by following the guidance at EM5252 and EM5253 to adapt these forms by selecting the “Other” option from the penalty offence options, and
  • enter Total Penalty Payable (if you do not wish to use the Tax and NIC table)
  • details of the penalty - in this free text box you must enter the details of the statutory provision under which the penalty is being charged, (for example, S98A(2)(a) TMA 1970) and give a clear description of the act/failure giving rise to the penalty. You should use the correct legislative references contained within COG914180, and
  • refer the case to the Authorising Officer.

The Authorising Officer will

  • consider the information provided
  • determine the penalty (if appropriate)
  • sign the 394 and
  • refer the papers back to you.

You will then

  • prepare a penalty notice letter (EC25 - available via SEES - forms and letters)
  • complete a SAFE referral stencil (Word 44KB) and
  • send the stencil with the penalty notice letter and 394(IT/CT) to the SAFE officer.

The SAFE officer will

  • create a charge on SAFE and
  • return the documents to you along with a payslip.

The correct SAFE entry to use is

  • for failure to submit P35/CIS36/P11D on time, the BROCS reference and penalty type ‘Non ECS PAYE EOY Penalty’.

For failure to submit CIS300s on time from 06-04-07- 05-10-11 see COG914290.

For failure to submit CIS300s on time from 06-10-11 see COG914297.

You will then

  • issue the 394(IT/CT), letter and payslip to the employer/contractor and
  • BF the case for 30 days.

If the employer/contractor appeals against any penalty determinations you should follow the guidance at COG914305.