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HMRC internal manual

PAYE Manual

From
HM Revenue & Customs
Updated
, see all updates

Employer returns: employer EOY penalties: calculation of a fixed penalty

This subject is presented as follows

 

Background

A fixed penalty is

  • Imposed under S98A (2)(a) TMA 1970
  • Issued and calculated automatically by ECS
  • Based on the employer / contractor return details
  • Subject to certain exceptions and exclusions
  • Issued where an employer or contractor fails to submit their annual EOY return by the due date

The minimum amount that can be charged for a fixed penalty is £100.

This figure increases

  • If the return is recorded as received later than one month after the due date

Or

  • The number of employees / sub-contractors is more than 50

Mitigation of fixed penalties

Because of the disproportionate size of a fixed penalty in relation to the number of employees and amount of tax and NIC payable, some measure of mitigation is given to smaller employers and contractors.

Mitigation is applied automatically by ECS when calculating a fixed penalty and limits it to the greater of

  • The total duty (Tax and NIC) shown on the return

Or

  • £100

Automatic fixed penalty calculation

The method of calculation of a fixed penalty by ECS is shown in the table below

Automatic Fixed Penalty Calculation    
     
£100 Multiplied by number of months (including any part months) from the due date, to the date the employer / contractor return is recorded as received Multiplied by the number of groups of 50 employees or sub-contractors

Calculating the number of months

A relevant month is

  • A month (or part month) from the due date of the return to the date the return is actually recorded as received on the Employer Business Service (EBS) using Function RECORD RETURN RECEIPT

Examples 

A 2000-01 return which is recorded as received on 23 July 2001 = 3 months

A 2000-01 return which is recorded as received on 29 January 2002 = 9 months

Calculating the number of groups of employees / sub-contractors

The number of groups of persons are calculated as follows

  • 1 to 50 counts as 1
  • 51 to 100 counts as 2
  • 101 to 150 counts as 3 and so on

The number of persons to be included from a return submitted by

  • An employer is based on the total number of P14s received
  • A contractor is based on the number of sub-contractors declared at section 3 of the CIS36 return

Examples 

1. If the number of persons = 25
   
  Penalty = £100 x 1 = £100
2. If the number of persons = 75
  Penalty = £100 x 2 = £200

Examples of the calculation of an automatic fixed penalty

1. An employer with a P scheme type submits their 2000-01 P35 return which includes 238 P14s late and is recorded as received on 23 August 2001
   
  * Penalty = £100 x 5 (groups of 50) x 4 (months) = £2,000
2. An employer with a PSC scheme type submits both the 2000-01 P35 and 2000-01 CIS36 late. Both are recorded as received together on 21 June 2001. The number of P14s accompanying the P35 return is 66, the number of CIS25s is 12
  The penalty for the late P35 is
  * £100 x 2 (groups of 50) x 2 (months) = £400
  The penalty for the late CIS36 is
  * £100 x 1 (group of 50) x 2 (months) = £200
  Total Penalty = £600