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HMRC internal manual

PAYE Manual

Employer returns: employer EOY penalties: exceptions to EOY penalties

This subject is presented as follows

 

Background

Not all types of employer or contractor are liable to an End of Year (EOY) penalty under PAYE provisions for non or late submission of an annual return, when a return is required.

Limited company contractors who have suffered CIS deductions from payments for operating as subcontractors within the construction industry may register for a PAYE scheme. The process of submitting an Employer Annual Return (P35) to reclaim the CIS deductions suffered is for administration purposes only. If this is the sole purpose of the return and it is received after the 19 May filing deadline any penalties for late filing should not be enforced.

Excluded scheme types

The following scheme types are excluded from EOY penalty procedures

  • DOME
  • DCNI
  • DPGEN
  • DPNI
  • ELECT
  • EXAM
  • EPA
  • TAS
  • PSS (where the return is received before 30 June)

Note: Taxed Award Schemes (TAS) 

From 2001-02 onwards, third parties became liable for Class 1A NICs on non-cash vouchers or benefits they provide to employees of another person. The P35 TAS is the statutory return for Class 1A NIC for those parties. Interest runs on non-payment of the Class 1A NICs and there are penalties for the non submission of the Class 1A return. Penalties can therefore be issued for Class 1A NIC but not for tax when the scheme type is TAS.

Other exclusions

In addition to employer records that have certain scheme types making them excluded from an EOY penalty, there other types of employer and certain other circumstances which also exclude an EOY penalty being issued.

These include

  • Employers with diplomatic immunity
  • Payment card reward schemes

It is not possible to automatically inhibit the issue of a penalty for these particular types of employer and as such if you identify any of these employers you will need to inhibit the penalty yourself in ECS. ‘Manually inhibiting penalties’ (PAYE51030) in this section gives details.

Penalties are also not charged if the following apply

  • Employer records holding any of the following indicators

    • Cancel One Year Only (COYO)
    • Deceased
    • Dormant
    • Insolvent (Bankruptcy or liquidation cases)
  • Employer records that have been transferred, merged out or succeeded to another employer reference