Claim a tax-free payment for online filing

If you have fewer than 50 employees and you file your 2008-09 Employer Annual Return (P35 and P14s) online you can claim a tax-free payment of £75 from HM Revenue & Customs (HMRC).

The deadline for these returns to reach HMRC was 19 May 2009. You can still claim the tax-free payment if you file your return late, but you may also have to pay a late-filing penalty.

This guide explains who's entitled to the payment, the conditions that apply and how to claim it. It also explains how to record and account for the tax-free payment and gives further information that agents need to be aware of.

On this page:

Who's entitled to the payment?
How to claim the payment
Recording and accounting for your tax-free payment
Information for agents

Who's entitled to the payment?

Employers with fewer than 50 employees who file their 2008-09 Employer Annual Return (P35 and P14s) online can get a tax-free payment of £75 from HMRC. The deadline for the 2008-09 return has now passed, but you can still get the tax-free payment if you file online late, provided you meet the conditions listed below.

The £75 payment for filing the 2008-09 return online is the last in a series of payments made over recent years to encourage smaller employers to start filing online. Starting with the 2009-10 return (due to HMRC by 19 May 2010), almost all employers are now required to file their Employer Annual Return online.

Conditions that apply

There are a number of conditions you must meet before you can claim the 2008-09 tax-free payment:

You must have had fewer than 50 employees during the 2008-09 tax year. To check how HMRC calculates this, see the guide ‘Employer deadlines for filing PAYE online’ - there's a link at the end of this section.
Your Employer Annual Return for 2008-09 must be necessary, and must contain at least one P14.
Your return must meet HMRC’s quality standards. (You can still get the tax-free payment if your return is rejected but you correct it and file it online again.)
If HMRC believes a PAYE scheme has been set up for the sole purpose of claiming the tax-free payment, then the payment will be refused (or recovered if it has already been paid).

Read about employer deadlines for filing PAYE online

Filing the Employer Annual Return online

Notification that you've been awarded the payment

If you are entitled to the £75 tax-free payment, HMRC would have confirmed this either with a letter or with an online notification towards the end of the 2008-09 tax year. To view your online notifications, log in to the PAYE Online service and select the option ‘Employer notices’.

(The tax-free payment notification would have been sent to you online if you were registered for HMRC Online Services at the time, even if you had opted out of receiving tax codes and other notices online.)

Go to the HMRC Online Services login page

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How to claim the payment

You can claim the tax-free payment in two ways. The quickest and easiest way is to reduce your next PAYE payment to HMRC - known as 'self-serving'. But you can also apply for a cheque.

Self-serve by reducing your next PAYE payment

To self-serve your 2008-09 tax-free payment, just reduce your next PAYE payment to HMRC by £75. You can do this as soon as you have successfully filed your return and received a validation message from HMRC.

The usual format of the validation message is: '9004: The EOY Return has been processed and passed full validation'.
But if you’re using commercial payroll software rather than HMRC’s online service it’s possible the message you receive will be worded differently.

If self-serving reduces your next PAYE payment to zero, you should tell HMRC by sending an online ‘nil payment’ notification. This will prevent late-payment reminders being sent to you. To advise HMRC of a ‘nil payment’, follow the link below.

Tell HMRC online that no PAYE payment is due

Applying online for payment by cheque

You can only apply online for your cheque if HMRC has notified you that your 2008-09 tax-free payment is available to claim as a refund.

You'll need to provide the following information, so have it to hand when starting to fill in the online form:

details of the Accounts Office that deals with your PAYE record (Shipley or Cumbernauld)
your Accounts Office reference - the reference you use when making payments to HMRC (you’ll find this on the cover of your P30BC payslip booklet or P30B letter)
the PAYE reference - you’ll find this on the tax-free notification from HMRC
your name, telephone number and email address

HMRC will send you an email confirming that they've received your application. As long as you don't have any outstanding Employer Annual Returns, they'll send you a cheque as soon as possible. If you have any outstanding returns for previous years, then your tax-free payment won’t be issued until you’ve submitted them.

If you're not up to date with your PAYE payments, HMRC will use your tax-free payment to reduce the amount you owe. If there's anything left you’ll get a cheque for the balance along with an explanatory letter.

Apply online for your tax-free payment cheque

Recording and accounting for your tax-free payment

You must record details of your tax-free payment on form P35 when filing your Employer Annual Return:

Enter any amount self-served in box 26 'Tax-free incentive payment received during the year'.
You don’t need to record amounts received by cheque in this P35 box 26. So if you receive a cheque for the full £75, enter '0'.

You don't have to pay VAT on the tax-free payment or show it on your VAT return.

In your business accounts, show the tax-free payment as 'other operating income'. The payment isn't taxable, so your tax calculations should show your profit reduced by the amount of the payment.

Examples of how to record the tax-free payment on form P35

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Information for agents

If you’re claiming the tax-free payment online on behalf of clients:

make sure that each client has received confirmation from HMRC that they've been awarded the payment
make sure that the clients have no outstanding Employer Annual Returns - you can claim, but payments won’t be issued until your client’s outstanding returns have been submitted
you can make an online claim for up to ten clients on a single form
if you're claiming for multiple clients on a single form, choose the Accounts Office that deals with the majority of them
you must complete the online form in a single session, so have the required information for all the relevant clients to hand
unless HMRC holds a valid form 64-8 authorising you to act for your client, they will communicate with your client rather than with you
HMRC will issue the payment as a cheque made payable to your client and will send it to their usual address
if HMRC uses the tax-free payment towards a client’s outstanding PAYE payments, the cheque issued will be reduced accordingly (and if the outstanding amount is more than £75, then no cheque will be sent) - in these cases HMRC will send a letter to explain

Complete the online claim form for agents

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