Exterior Wall Systems

An organization or business running a payroll must submit it's year end forms (P35 and P14's) by 19 May every year. In the event the submission of the return is late then a penalty of 100 per 50 employees for every month or part month that the return is outstanding will be levied.

HM Revenue & Customs (HMRC) sends a penalty notice advising you of the amount of thepenalty charge and explain the way it can be paid for.

Should the return remains unpaid for upwards of four months then a penalty notice shall be issued after 19 September and again the subsequent January and May, if necessary. The penalty notices will show the amount of penalty that's building up simply because the return has not been filed on time.

In practice, if a business has overlooked to submit the return the very first it is likely to be aware of it is when a penalty notice for 400 is issued in September as HMRC don't routinely send out penalty notices prior to that date. This is widely felt to be unfair on enterprises that have genuinely made an oversight. If they were made aware of the problem within the first month of defaulting and been issued with a charge of 100 then this omission could be fixed and even a more reasonable penalty paid.

Because of the the unfairness felt to be built into this penalty procedure a case (Foresight Financial Services Ltd v HMRC) has actually been taken to a Tribunal as well as a decision issued over a penalty that was raised by HMRC for the late submitting of a P35.

The main points of the case are that Mr Owen, Director of Foresight Financial Services Ltd was notified to the fact that the P35 in relation to his payroll wasn't submitted by 19 May following receipt of the Penalty Notice from HMRC in the amount of 400.00, dated 7 September. In a letter to HMRC, Mr Owen conceded that the P35 Return for 2009/10 had not been submitted until 21 October 2010, although he believed that it was submitted ahead of the deadline. He appealed to the initial penalty of 400.00 as well as an additional final penalty of 200.00 that was issued on 1 November.

The Tribunal ruled there had been a delay in submitting the year end return due to the payroll processing for the company without reasonable excuse and so the prerequisite for HMRC to show that a penalty was due was satisfied. HMRC then sought to enforce the penalties as per their published guidance. However, the decision from the Tribunal makes some interesting points concerning the penalty routine at HMRC.

The Tribunal decision stated there was 'conspicuous unfairness' by HMRC in not sending a Penalty Notice until nearly four months following the P35 submission deadline. If the Penalty Notice was issued promptly after the defaultwas initially noticed by HMRC then the penalty would have been 100.00 which may have alerted Foresight of the non-compliance earlier. The Tribunal stated that there's a duty on HMRC to send out the first Penalty Notice no more than Two weeks after the 19 May in each year. HMRC computers are capable of being set to notify VAT penalties and can be set in a similar way for End of Year Returns.

With regards to Foresight, because of the Tribunal's findings, the penalty was lowered from 600.00 to 300.00.