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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: penalties: raising formal penalty determinations - penalties of a maximum set amount or maximum of a difference between amounts

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 included in a contract settlement.

When proceeding to raise formal penalty determinations for a penalty that is

  • a maximum of either a set amount or
  • a maximum of the difference between amounts

the penalty must be authorised by the Authorising Officer.

This guidance refers to failure to submit P35/CIS36/P11D(b) on time where the return is over 12 months late, as well as incorrect returns arising under S98A(4), including CIS300s from 06-04-07 to month ending 05-03-09.

Once an appropriate amount of penalty has been calculated you will

  • complete an AO Report - Penalties (available via SEES - forms and letters) stencil
  • complete a 394 (IT/CT) (available via SEES - forms & letters) 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).
  • enter 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(4) 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
  • authorise the penalty (if appropriate) and
  • return the papers.

You will

  • 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 ETMP reference & penalty type ‘Non ECS PAYE EOY Penalty’
  • for incorrect returns, the UTR and penalty type ‘394 penalty’.

For failure to submit CIS300s on time from 06-04-07 - 05-10-11 see COG914295.

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/subcontractor, and
  • BF the case for 30 days.

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