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HMRC internal manual

PAYE Manual

Employer returns: capture employer return - 2005 onwards: checklist and declaration on P35 - 2005 onwards

This process should be followed

  • When capturing an employer return for any year 2004-05 onwards 
  • As part of post capture processing for years up to 2003-04. For guidance on 2003-04 and earlier years see ‘Checklist and declaration on P35 and P35MT - up to 2004’ at PAYE46020 
  • For guidance on question 6 for years 2007-08 onwards see ‘P35 questions and declarations - 2008 onwards (Action Guide)’ at PAYE53006 

The following subject is presented as follows

 

Background

When completing a return an employer is required to complete in full the following entries

  • A checklist of questions
  • A box to enter their ECON number
  • A declaration and certificate recording enclosures

For the year 2004-05 onwards entries are found are on page 4 of the P35.

When capturing a P35 return for an employer with an excluded scheme type the answers to the questions do not need to be recorded and the boxes on the capture screen will not be available.

Note: An excluded employer is not required to file their annual end of year returns online. The following scheme types are excluded from segmentation and the need to use online filing to submit their returns

  • DCNI
  • DPGEN
  • DPNI
  • ELECT
  • EXAM
  • NORPRO
  • PSS
  • TAS
  • XP

The following questions relate to various aspects and a review of the answers provided by the employer will determine whether any further action needs to be taken.

Question 1

This asks the employer whether they have enclosed for every person in their paid employment during the year, including those who have left

  • An End of Year Summary, form P14

Or

  • The declaration completed by students employed by them during school holidays, form P38(S)

Where the employer has done this

  • They must tick ‘YES’

If the employer had employees for whom they have not completed a form P14 or P38S

  • They must tick ‘NO’

For these employees the employer must complete a form P38A. These forms are available from the Employer Orderline.

Question 2

This asks the employer whether they made any Free of Tax (FOT) payments to any employee. A FOT payment arises where the employer rather than the employee pays any tax due. If this has occurred the employer must answer ‘Yes’ to this question.

Depending on the other entries made on the P35 further information may be needed from the employer or you may be required to take some action.

Question 3

This asks the employer to report details when someone else had paid or provided any of the following to their employees during the year as a result of the employee working for them

  • Expenses
  • Benefits
  • Vouchers exchangeable for money

If this has occurred the employer must answer ‘Yes’ to this question.

Depending on the other entries made on the P35 further information may be needed from the employer or you may be required to take some action.

Question 4

This asks the employer whether anyone previously employed by a person or company outside the UK worked for them in the UK for at least 30 consecutive days. If so, it tells them to complete and enclose a form P14 for the employees.

If this has occurred the employer must answer ‘Yes’ to this question.

Depending on the entries made on the P35 further information may be needed from the employer or you may be required to take some action.

Question 5

This asks the employer whether they have paid any part of an employee’s pay direct to anyone else, for example, paying school fees direct to a school.

If they have, was the payment included in the employee’s pay for tax and NIC purposes and in the figure of pay shown on the employee’s form P14?

If this has occurred the employer must answer ‘Yes’ to this question.

Note: This does not include Attachment of Earnings Orders or payments to the Child Support Agency.

Depending on the entries made on the P35 further information may be needed from the employer or you may be required to take some action.

Question 6

This asks the employer whether the rules relating to work done through a service company or partnership apply to any of their business.

From 6 April 2000 new rules may apply to anyone supplying their services to a client through an intermediary, such as a service company or partnership. The only engagements affected by the new rules are those in which the worker would be an employee of the client if it were not for the service company or partnership involvement.

Where the new rules apply the intermediary may have to account for an additional amount of tax and NIC based upon the income from the engagements, after an allowance for certain expenses and pension contributions.

Where a worker operated through an intermediary in a way which falls within the new rules in the year of the return the employer must

  • Tick the first box under this question ‘YES’

Where the employer included any tax and NIC deducted from the deemed remuneration on this return the employer must

  • Tick the second box under this question ‘YES’

Where the employer has ticked ‘Yes’ in the second box but the amount of the deemed payment is provisional, they must confirm this on a separate sheet or by making a prominent note on the return.

If an employer cannot finalise the amounts by the 19 May, no penalty will be charged so long as

  • The return is received by that date

And

  • The tax and NIC due in respect of the deemed payment is paid to HMRC by 31 January of the following year 

Where this does not arise then interest charges will accrue on late payments from 19 April until the date when the tax and NIC is paid.

The employer-related electronic file, ‘Service Companies - Deemed Payments’, is used to record these cases. This file will need to be reviewed in January to confirm whether an additional return has been received providing the actual figures or the employer has confirmed that the provisional figures are correct.

Depending on other entries made on the P35 further information may be needed from the employer or you may be required to take some action.

Non standard answers

From year 2004-05 the employer record held on EBS holds information about the P35, this includes the questions on page 4 of the return.

The employer record held on ECS holds certain information about the P35, this includes the questions on the front of the return.

The EBS record will automatically apply ticks to particular box entries apart from excluded type schemes. These default entries are shown in the following table

Question Answer
   
Question 1 Yes
Question 2 No
Question 3 No
Question 4 No
Question 5 No
Question 6 No

As part of the process of capturing a return the answers to the P35 questions must be reviewed. If answers in the boxes on the P35 do not match the automatic ticks the EBS record must be changed to match those on the P35.