PAYE51001 - Employer returns: employer EOY penalties: introduction

Background

Employers and contractors are required by PAYE Regulations to submit annual returns on the appropriate return form(s). Section 98A(2) TMA 1970 provides the legislation for the provision of a penalty for failure to comply with this requirement.

Penalty determinations are normally issued for all returns received late, apart from certain types of employer and special circumstances that will exclude them from the issue of a penalty.

Issuing penalties - ECS

EOY penalties are issued through the Employer Compliance System (ECS).

Access to the penalty functions is through the ECS role ‘EOY Penalty Officer’ which should be allocated by the ECS ‘First User’ in each office. It is usual for penalty appeals and any resulting charge amendments to be dealt with and authorised by officers at officer grade or above.

Types of penalty

There are 2 different types of penalties, which can be charged

  • Fixed penalties
And

Duty geared penalty

A duty geared penalty is

  • Imposed under S98A (2)(b) TMA 1970
  • Considered where failure to submit an annual End of Year return continues for more than 12 months after the due date 
  • Determined without prejudice to any interim penalties already issued
  • Only issued where it has been authorised by Tax Administration Litigation and Advice (TALA)

Calculating penalties

Fixed Penalties are calculated on a formula based on

  • The date of receipt of the return
And
  • The number of P14s submitted with the P35 and / or the number of sub-contractors declared at section 3 of the CIS36 return

PAYE51010 gives details of

  • How a fixed penalty is calculated
  • How mitigation is applied in certain cases
And
  • Examples of fixed penalty calculations

Inhibiting penalties

Certain types of employers and employers with special circumstances are excluded from receiving an EOY penalty

  • 'Exceptions to EOY penalties' (PAYE51025) gives details of who is excluded
  • 'Manually inhibiting penalties' (PAYE51030) provides details on the inhibition signals that may be used to prevent an employer receiving a penalty