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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

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.