P35 Tax free payments

How to show tax-free payments on your 2007-2008 P35

Example 1: Employer self-serves the 2006-2007 tax-free incentive payment against their 2007-2008 PAYE.

Enter £150 in the ‘Tax-free incentive payment received during the year’ box.

Example 2: Employer receives the 2006-2007 tax-free incentive payment as a cheque payment.

Enter ‘0’ in the ‘Tax-free incentive payment received during the year’ box.

Example 3: Employer applies for a cheque payment of the 2006-2007 tax-free incentive payment but part, or all, of the payment was held back and put to earlier year arrears.

Enter ‘0’ in the ‘Tax-free incentive payment received during the year’ box.

Example 4: Employer applies for a cheque payment of the 2006-2007 tax-free incentive payment but asks for part of the payment to be put to their 2007-2008 PAYE.

Enter the amount put to your 2007-2008 PAYE and not the amount actually repaid.

Example 5: Employer self-serves more than one year’s tax-free incentive payment against their 2007-2008 PAYE.

Enter the total amounted claimed ‘Tax free incentive payment received during the year’ box. The payments must not be included in any other field on the P35.

Example 6: Employer self-serves the 2006-2007 tax-free incentive payment against their 2007-2008 PAYE but has not yet received confirmation the award of the tax free payment.

Enter ‘0’ in the ‘Tax free incentive payment received during the year’ box. An additional payment of £150 may be needed to ensure that the PAYE record agrees with the amounts due.

Example 7: ‘Nil’ Return sent for 2006-2007 but no confirmation received that the tax-free incentive payment has been awarded.

Enter ‘0’ in the ‘Tax free incentive payment received during the year’ box. A tax free payment is only awarded where an employer, with fewer than 50 employees, sends an acceptable online Return that is required according to PAYE legislation.

In all scenarios where the answer is to enter ‘nil’, the tax-free incentive payment box must be completed with a ‘0’ as it is a mandatory field. The Return will fail the Quality Standard checks if left blank and the Return will be rejected.