ECH21025 - Penalties: Failure to Submit an End of Year Return - Over 12 Months of Lateness

Section 98A(2)(b) TMA 1970

This provides a further penalty, additional to the Section 98A(2)(a) monthly penalty ECH21020, where the failure continues beyond 12 months.

• For example, if the 2000/01 End of Year Return was not made by 19 May 2002, this additional penalty could be sought.

The End of Year Section (EOY) can deal with these cases. You must consider including these penalties in a contract settlement where

• the employer/contractor has failed to submit a return by the due date and
• End of Year section have not taken action to seek a penalty.

Where the penalty is to be sought as part of the case you must

• liaise with EOY Section and
• arrange for ECS to be inhibited if necessary.

The maximum penalty before abatements is equal to the amount of unpaid tax and NIC at 19 April immediately following the year end.

Thus in the example above

• if a return submitted after 19 May 2002
• showed £6,000 due
• but only £1,000 was paid at 19 April 2001

The maximum penalty before abatements would be £5,000.

Where you are involved with an employer/contractor where returns are outstanding beyond 12 months they should

• process the P35 if PAYE was operated, otherwise
• seek a contract settlement to include the liability outstanding, interest and penalties.

Note that these penalties are based on 100% of the tax / NICs difference or the tax / NICs underpaid and are subject to Article 6 of ECHR ( ECH8026)

You should

• provide HRA advice and
• issue factsheet EC/FS4

to the employer/contractor at the earliest opportunity. ( ECH8027)

If it has been necessary to issue formal determinations or decisions consideration should be given to making penalty determinations ( ECH21135) at the same time and listing all appeals for the same Commissioners hearing.

Where an employer/contractor submits a return during the compliance check this should be retained in the ECR papers and not processed. A memo explaining the situation should be sent to the End of Year Section.

Where a late return is found to be incorrect Section 98A(4) penalties also need to be considered ECH21040.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

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