May 2007

Penalty Notices for Employers

HMRC have recently issued a considerable number of penalty notices to employers for not submitting their 2005/06 employer annual and contractor returns, which were due for submission by 19 May 2006. HMRC have stated that the reason for the long delay in issuing the penalty notices was that:

“We wanted to ensure that we had taken account of any returns we are still working. We took the decision not to issue 2005/06 reminders for the same reason. That work required extensive analysis of our various systems. The delay and this analysis has enabled us to avoid issuing a penalty notice for any unprocessed returns.”

A large number of employers are maintaining that a penalty is not due because returns have already been submitted. It appears that some of the penalty notices have been issued because employers e-filed test returns thinking they had made a final submission (test returns can be submitted in advance of a final return and help employers to identify errors in the returns). HMRC have confirmed that penalties will not apply to those who filed test returns thinking that they had made a valid final submission. However it is important to appeal against any penalty notices which have issued where the employer believes that the notice was issued in error.

HMRC have issued penalty notices for £100 for every 50 employees and/or subcontractors for each month they believe that the return has been outstanding. The penalty is based on the employers/contractors profile information received for previous years. Penalties are not final because they cannot be settled until a final return is filed.

Penalties will not apply if a return has already been validly submitted and will also not apply if there were no employees.

As a reminder the deadline for submission of this year’s employer and contractor end of year returns is 19 May 2007.

If you would like any help with your employer and contractor end of year returns or have received a penalty notice, which you believe has been issued incorrectly, please get in touch.

Internet Links:

HMRC guidance and HMRC booklet