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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: compliance revenue recording: failure to submit returns - scheme open

Where an employer has a live PAYE scheme but returns have not been submitted an underpayment may arise due to

  • a failure to pay over the full amount due to us, or
  • a failure to operate PAYE, CIS and/or NICs.

Where the P35 (up to and including 2012-13) and/or a Full Payment Submission (FPS) (from 6 April 2013) is outstanding and there are additional risks identified you can score compliance revenue following the guidance below

  • calculate and pursue the amount of the shortfall
  • calculate and pursue the amount of any failure to operate PAYE, CIS and/or NICs
  • calculate and pursue any interest due (see COG904270 for guidance on charging interest for RTI inaccuracies)
  • arrange for the employer to submit the outstanding P35 returns online within agreed timescales

    • if exceptionally the employer is unable to send the returns online collect any outstanding returns (appropriately corrected) and forward them to be processed (COG915540 - Recovery methods, COG906510 - Overview and Definition of Terms, COG906570 - Follow up action to take)
  • instruct the employer to report the correct year to date pay and deductions on the next FPS
  • consider penalties in accordance with COG914045 - First 12 months of lateness, COG914050 - Over 12 months of lateness
  • where there has been a failure to operate, calculate the current year adjustment if appropriate (see COG906590)
  • consider Future Revenue Benefit where appropriate (see COG915640).

On Caseflow you should record under recovery type ‘P35 obtained’

  • the difference between

    • the amount due on the P35 (up to and including 2012-13) and
    • the amount paid to the 19 April of the relevant year at the start of the Compliance check
  • the difference between

    • the amount due on each FPS (from 6 April 2013) and
    • the amount paid at the start of the compliance check
  • any liabilities in respect of the employers failure to operate PAYE, NIC and / or CIS including the current year
  • the interest.

In addition you should

  • record the amount of the penalty as

    • ‘P35 obtained’ if you arrange for the penalties to be issued by ECS or
    • Class 6 Settlement if the penalties have been collected via a contract settlement.

If it is not possible to collect the outstanding returns you should

  • document the reasons why
  • recover the underpayment by

    • Class 6 contract settlement, or
    • formal determination
  • take the appropriate action to update the individuals National Insurance record
  • inform the appropriate section (for example DMB, Employer Office) to

    • make sure that duplicate action is not undertaken.

The following amounts cannot be recorded as compliance revenue

  • the amount of any fixed penalties that have been (or about to be) issued via ECS.

Note: If penalties have already been issued by ECS you should attempt to collect the amount of the penalties along with any underpayment unless recovery action has reached a stage where it would be detrimental for us to withdraw from such action.

Where a failure to make CIS deductions exists see COG909620 - Open Year Inaccuracies or COG910130 - Open Month Inaccuracies.

Care should be taken to ensure that the Employer Office do not duplicate penalty action. You should therefore

Where inaccuracies for an open year or open tax period are to be included in a contract settlement you should

  • follow the guidance at COG915640 - Current and Open year adjustments.

For guidance on how to score a current year adjustment you should

  • consider the guidance at COG906590 in respect of current year liability and COG915640 for Current and Open year adjustments.
  • for guidance on how to claim Future Revenue Benefit consider the guidance at COG915640 and the Compliance Measures guidance.

Only the additional compliance revenue recovered from your actions can be counted. Any payments already made by the employer must not be claimed.