Completion of the 2008-09 P35 due by 19 May 2009

Provisional figures: those employers to whom 'IR35' applies

For those employers to whom 'IR35 'applies, at page 78 of the CWG 2(2009) (PDF 517K) 'Late payments of tax and NICs on deemed payments ', we advise that if you are not able to calculate the actual amount of deemed payment for 2008-09, you may submit provisional figures on the P35 to be submitted by 19 May 2009, subject to certain criteria. One of the criteria in CWG2 was that you must make clear in a covering letter that the figures on the P35 are provisional.

HM Revenue & Customs (HMRC) has now dropped the requirement to notify HMRC separately if the figures are provisional. Where part two of Question 6 on the P35 is answered 'yes', HMRC will write to the employer later in the year reminding them that if their P35 figures were provisional, they must submit an amended P35 and make a balancing payment by 31 January following the relevant 19 May.

Where HMRC does not receive an amended P35 and balancing payment by 31 January following the relevant 19 May, the original P35 submitted will be considered to reflect figures which the employer declares to be final and correct.

Some employers have received letters from HMRC relating to the 2007-08 P35 reminding them of the need to send amended final details where provisional figures had been submitted. Unfortunately the trigger for these letters was a 'yes' answer to part 2 of Question 6 rather than HMRC identifying those employers who had sent HMRC letters stating that the P35 included provisional figures. If recipients of the letters had originally included provisional figures on the P35 in accordance with the guidance in the CWG2, the assumption is that they will have submitted amended details by 31 January 2009. Recipients of letters who did not include provisional figures on their P35 should ignore the letter. HMRC confirms that answering 'yes' to Part 2, Question 6 did not, and does not, indicate that figures on the P35 are provisional. HMRC apologises for the confusion and inconvenience caused.

Meaning of ‘Service Company’ in Question 6

Guidance on how to answer Question 6 is in Employer Helpbook E10 (2009) (PDF 253K) in the section headed 'Part 3 Checklist'. Note that the answer to the first part of the Question 6 depends on whether the employer comes within the definition of 'Service Company' in the E10 and whether the IR35 or Managed Service Company legislation applies, or even whether or not the employer is a company. The two parts of Question 6 are not mutually inclusive so HMRC accept that it will be quite common for the first part to be answered 'yes' and the second part 'no'.

HMRC accepts that direct reference at Question 6 on the P35 to the E10, which contains the explanation of how the question should be answered, would have caused less confusion. This will be addressed next year.