ECH21005 - Penalties: Employer's and Contractor's Liability

Employers and contractors are required

• to submit PAYE, NIC, CSL end of year returns
• CIS end of year returns up to 05-04-07,
• CIS monthly returns from 06-04-07
• forms P11D, P9D, P11D(b), within statutory time limits, and
• are responsible for ensuring that the returns are correct.

With effect from 1 April 2009 there will be two different penalty regimes in operation.

If a return which covers a tax period beginning on or after 1 April 2008 and due to be filed from 1 April 2009 is submitted with inaccuracies it will be subject to the new penalty regime outlined in Schedule 24 of FA2007 and summarised in the Compliance Handbook (CH).

Note: Schedule 24 does not apply to incorrect forms P11D(b). Penalties will still bechargeable under Regulation 81(1) Social Security (Contributions) Regulations 2001(ECH21041).

EC staff should familiarise themselves with the CH and the different terminology used.

This chapter deals with the regime in existence for returns due up to 31/3/2009.

There are two kinds of penalty

• failure penalties:
  
  
• • for failing to do something, such as making a return on time. ECH21020, ECH21025, ECH21026, ECH21030, ECH21245 and ECH21250.

• error penalties:
  
  
• • for doing something wrong, such as fraudulently or negligently submitting an incorrect return ECH21040, ECH21041, ECH21045 and ECH21255.

Failure penalties are due if, as a matter of fact, the failure occurred. For example the return was late. You do not need to show 'fraudulent or negligent conduct'.

Failure penalties will continue to be issued in the same way as they are now. However a new penalty regime will also be introduced for late filing penalties as part of Finance Bill 2009.

The only way to avoid a failure penalty is for the employer or contractor to demonstrate a reasonable excuse for lateness ECH21035. The excuse must cover the whole period of lateness.

Error penalties are due if a return is incorrect, but it must be incorrect due to fraudulent or negligent conduct. See ECH21050.

See ECH21006 regarding domestic employers (DOME schemes).

See ECH21009 regarding Statutory Payments penalties.