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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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Employer returns: capture employer return - up to 2004: NIL returns - up to 2004

Note: This subject should be used for tax years up to 2003-04 only.


An employer / contractor only has to make an annual return (forms P35 and P14) where they have used a deductions working sheet (P11 or equivalent) for at least one employee during the year. For example

  • Where earnings were above the Lower Earnings Limit


  • Where the employer was instructed to operate a code

Employers do not need to send back a P35 just because we sent them one. For example, a P35 is not necessary

  • Where all the employees were paid below the Lower Earnings Limit for National Insurance (assuming tax was also not due)


  • Where there were no employees during the year and the directors’ remuneration was nil

However, employers may wish to tell us that no return is due to avoid the issue of automatic penalties for not filing a return.

Employers can tell us that they do not need to make a return by

  • Telephone
  • Post


  • An online structured email form - one for employers and one for agents to make a declaration on behalf of their clients (up to a maximum of eight employers). On receipt of a completed form a central team in East Kilbride will send an acknowledgement followed by a further email when the form has been processed. The online email form can be found on the HMRC website under ‘Notifying HMRC if you have no Employer Annual Return to make’

If you are told by telephone you must ask two basic questions to satisfy yourself that no return is due

1. Have you been authorised to pay tax credits to any employees?
2. Was any employee paid enough to use a Deductions Working Sheet?

An answer of ‘yes’ to either question means that this is not a nil return and you should tell the employer that they must make a return.

If you have decided that no return is due the year should be cancelled one year only. You must not set COYO without some notification from the employer.

Cancel one year only

Under certain circumstances, you may formerly have cleared a year cancelled one year only (COYO) and a subsequent return is received. You must record receipt and capture all returns that are received, subject to the normal Pre Capture checks, regardless of whether they are ‘NIL’ or not.

For employer records where a return has not been received and none are due, you may clear a year COYO if all of the following criteria are met

  • No payments of earnings equivalent to or above the Lower Earnings Limit have been made to employees
  • There is no evidence of payments being made to subcontractors with or without tax deductions being made from these payments
  • No payments have been made or are due to Banking Operations or a Debt Management Office relating to the year of the return
  • No tax credits have been authorised or funding payments made to the employer
  • No Class 1A NIC signal held on BROCS (viewable using Format 9) indicating the employer is liable to pay Class 1A NIC charges

For more information see PAYE21021.

Forms P35 with forms P14

As a result of changes to the legislation relating to entitlement to benefits, NICO require submission of forms P14 where

  • Details of earnings are shown in column 1a of form P14

And those earnings

  • Reach or exceed the NIC Lower Earnings Limit, even though no contributions may be paid

When a form P35 recording nil deductions is received together with forms P14 that show any entries in the earnings column 1a you must

  • Use Function RECORD RETURN RECEIPT to record the receipt of the return
  • Use Function CAPTURE EOY RETURN DETAILS to capture the return details


When a nil return is received, it is important that the employer record is reviewed to ascertain whether it is appropriate to cease or cancel the employer record. This will ensure that only live employer records are held where a return is expected and due.