ECH21040 - Penalties: Incorrect End of Year Returns

Section 98A(4) TMA 1970 provides a tax, NIC geared penalty for fraudulently or negligently submitting an incorrect End of Year return ECH21050 for returns due to be filed prior to 1/4/2009.

The maximum penalty before abatements is an amount equal to the difference between the tax and NIC liability returned and the tax and NIC liability which should have been payable. The amount actually paid is not relevant in calculating the difference but may be relevant when considering the abatement for seriousness (ECH21085 & ECH21090).

For example, a form P35 which returns £8,000

• where it is later demonstrated that
• £14,000 of tax and NICs should have been returned
• attracts a maximum penalty before abatements of £6,000.

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 factsheets EC/FS3 & 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 issuing penalties (ECH21135) at the same time.

Regulation 80 Determinations ECH22090 

Section 8 NICs Decision ECH22091 

Regulation 13 Determinations ECH14300

Whenever penalties for an incorrect return are considered you must also

• consider whether the return was also submitted late (ECH21025 and ECH21026)
• consider the overall penalty position on the return (ECH21047)