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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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Employer returns: employer starter and leaver forms: employer e-file in-year penalties: introduction


From April 2009 large and medium size employers (with 50 or more employees) were required to file starter and leaver forms online.

Small employers (with 50 or less employees) were also required to file these forms online from April 2011.

From 6 April 2012 penalties were introduced to cover violations, where an employer failed to file online during the period 6 January 2012 to 5 April 2012.

Small employers who failed to submit their PAYE in-year forms online between 6 April 2011 and 5 January 2012 were also sent one penalty warning letter, following the first failure in that period.

Regulation 210, Income Tax (Pay as You Earn) Regulation 2003 provides the legislation for the provision of a penalty for failure to comply with this requirement.

Penalty determinations are normally issued when any starter or leaver forms are not filed online; through the Internet or Electronic Data Interchange (EDI), apart from certain types of employer and special circumstances that will exclude them from the issue of a penalty.

Issuing penalties - ECS

In-year penalties are issued through the Employer Compliance System (ECS).

Access to the penalty functions is through the ECS role ‘EOY Penalty Officer’ which should be allocated by the ECS ‘First User’ in each office. It is usual for penalty appeals and reviews and any resulting charge amendments to be dealt with and authorised by officers at Officer Grade or above.

Types of penalty

There is only one type of penalty which can be charged and that is a fixed penalty.

Calculating penalties

Fixed penalties are calculated on a formula based on the number of starter and leaver forms sent to HMRC by the employer during a particular quarter. PAYE50910 gives details of

  • How a fixed penalty is calculated


  • Examples of fixed penalty calculations

Inhibiting penalties

Certain types of employers and employers with special circumstances are excluded from receiving an in-year penalty. The subject

  • ‘Exceptions to in-year penalties’ (PAYE50940) gives details of who is excluded
  • ‘Manually inhibiting penalties’ (PAYE50945) provides details on the inhibition signals that may be used to prevent an employer receiving a penalty