Useful Payroll News and Updates
Late payments of PAYE - Beware delayed penalty notifications
FEBRUARY 2012
Penalties are applied on a sliding scale of 1% through 4% determined by the number of defaults in any tax year (after the first default which only gives rise to a warning notice).
Thus the penalty to be charged cannot be established until after the end of the tax year when the total of defaults for the period is known. That penalty rate is then applied to the sum of all the PAYE sums due for which a default has been recorded. Only then is the penalty demand issued.
Furthermore the Revenue are under no obligation (beyond the initial warning) to notify employers of subsequent defaults or the rate of penalty being incurred with the result that some employers will receive demands for substantial penalties following the end of any tax year but with no notification of continuing failures giving rise to those penalties.
Employers should therefore be very particular to ensure their payments of PAYE are made on time and must also bear in mind that regardless of the method of payment, by cheque or by electronic transfer, the funds must be in the Revenue's bank account by the 19th of the month following the PAYE month concerned. (It should not be assumed that all forms of electronic payment are immediate. If in doubt employers should check with their bankers.)
Construction Industry Scheme (CIS) returns made on a photocopy
FEBRUARY 2012
A partnership submitted their CIS returns on a photocopy of the relevant form and HMRC imposed penalties. The First Tier Tribunal allowed the appeal observing that since the format of the original return document was approved it must follow that the copy of it was also an approved document.
P35 Annual PAYE Return -- don't forget to remove the ' test submission tick’
JANUARY 2012
A P35 return form carried a ' test submission ' box which, in its default form, is already ticked. Submitters were obliged to remove the tick when making their annual return.
Writtle College submitted their annual return without removing the tick and received a £400 penalty for failure to submit the return (it had been disregarded as a test submission).
The First Tier Tribunal allowed its appeal noting that HMRC had not warned taxpayers of the significance of failing to remove the tick from the test submission box.
Employees' use of own cars for duties of employment - lump sum allowances
JANUARY 2012
The upper tribunal (Tax & Chancery Chamber) has determined that there is insufficient link between the lump sums paid to employees and the use of the vehicles with the result that it is confirmed that such lump sums are taxable as salary in the normal way and subject to both PAYE and NI contributions. They were held not to be paid according to the use made by employees of their car for company business.
See Taxation 25th August 2011 at page 4 CRC V Cheshire Employer & Skills Development Ltd (formerly Total People Ltd).
Late P35 PAYE end of year submission penalties
November 2011
The P35 annual return must be submitted by 19th May following the tax year end of 5th April. Late submission for smaller employers involves a penalty of £100 for each month or part month that the return is late. Similar penalties are applied to P11D returns of benefits in kind that must be submitted by 6th July.
It is far from unknown for the first penalty notices to be issued in the autumn, commonly with four, five or even six months penalties. And for smaller employers in particular they may not even have been aware that they have overlooked the return. The tribunal has recently upheld an appeal against just such a charge. They tribunal could see no reason why the Revenue should delay sending notices out for four months resulting in an unnecessary penalty charge -- had the penalty notice been issued at an appropriate time soon after the alleged failure the penalty sought would have been much smaller. They tribunal held that the Revenue had neither acted fairly nor in good faith and the penalty was set-aside.
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