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HMRC internal manual

Compliance Operational Guidance

From
HM Revenue & Customs
Updated
, see all updates

Supporting Guidance: employer compliance: guidance by subject: compliance revenue recording: P35 omissions and PAYE reconciliations (up to and including 2012-13) - correct amount of tax and NIC deducted and paid in full

Before you follow the guidance on this page you must read COG915600 and COG915601 which provide important background information.

If the employer has deducted and paid the correct amount of tax and NIC and you have not identified any additional liabilities, you should ask the employer to submit a supplementary return (P35 and P14s) for the omitted tax and NIC.

A supplementary return does not displace the original return and is the preferred method of providing the information required to reconcile the deductions and payments the employer has made in accordance with the PAYE regulations and for HMRC to allocate tax and NIC to individual employees’ records.

Almost all employers are now required to file their employer’s annual return online. Unless the employer is exempt from filing online you should ask them to send the supplementary P35 and P14s electronically. To ensure that the omitted tax and NIC are added to the amounts returned on the original P35, you should advise the employer to send the supplementary return as an amendment to the original return.

Note: Guidance on how to send a supplementary return online can be found on page 15 of CWG2(2012).

If exceptionally the employer is unable to send the supplementary return online HMRC can process paper returns (P35 and P14s) but this is a less efficient process so you should make every effort to encourage the employer to file the supplementary return online.

If however, paper returns are required you should

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You should ask the employer to send the completed returns to you and upon receipt you should send them to Employers Office for Processing to the address below

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If the employer is unable to provide the information as a supplementary return and you are satisfied that there are no additional unpaid amounts or liabilities, you should ask the employer to provide a schedule of the relevant tax and NIC and a letter confirming their agreement that they were deducted and paid in accordance with the relevant PAYE and NIC regulations but they failed to include them on their P35 return.

Upon receipt you should prepare a pro forma P35 and send it to Employers Office for processing along with a copy of the employers letter and the schedule of tax and NIC deductions.

Although a pro forma return has no statutory basis it provides an administrative method of reconciling the tax and NIC the employer has paid and confirmed are correctly due and payable.

Note: You can only complete a pro forma return for tax and NIC which has already been paid. You must not include any unpaid tax and NIC because DMB will not be able to take any enforcement action to recover the underpayment.

If exceptionally the employer cannot provide a schedule but you are satisfied that there are no additional unpaid amounts or liabilities, you should ask the employer to write confirming their agreement that the tax and NIC was deducted and paid in accordance with the relevant PAYE and NIC regulations which they then failed to include on their P35 return. Upon receipt you should complete a pro forma P35 and send it to Employers Office for processing along with a copy of the employers letter to

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Note: From 2012-13, yield can only be scored on P35 overpayments if we can establish a clear risk that

  • a repayment was likely to have been made now or in the future
  • the amount of the ‘overpayment’ has or would have been at risk of being attributed against another amount of tax outstanding.

If this criteria is met you should wait for the supplementary/pro forma return to be processed before scoring yield in ECS/Caseflow.

Penalties - in all the above circumstances, if a penalty for an incorrect or inaccurate return is appropriate, you should seek to recover by way of a penalty only (Word31KB) contract settlement or formal determination/assessment.