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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
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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)

You do not use the PDAC when calculating these penalties.

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, payslip and an appeals note (EC26 - available via SEES - forms and letters) 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.