P11d late filing penalties
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If forms P11D Expenses and Benefits are not received by HMRC by 6 July after the end of the tax year, penalties for late forms P11D can be charged.
Section 98(1)(b) Taxes Management Act 1970 provides for penalties for late forms P11D.
Section 98(1)(i) provides for a maximum initial penalty of £300 per form, for failure to submit forms P11D. HMRC needs to make an application to the First Tier Tribunal who can decide whether to impose these penalties.
Section 98(1)(ii) provides for continuing penalties of a maximum of £60 per day thereafter, until the failure has been remedied. These penalties can only be considered after an initial penalty has been imposed by the Tribunal.
In view of this procedure, it is rare for HMRC to charge any penalties for late forms P11D. HMRC’s guidance can be found at COG914060.
Penalties for late form P11D(b)
If form P11D(b) Return of Class 1A NIC due on Expenses and Benefits is not received by HMRC by 6 July after the end of the tax year, a penalty for late form P11D(b) will be charged. There are two types of penalties outlined below. HMRC’s guidance is at COG914055. For both penalties, an appeal can be made if there is a reasonable excuse for the delay.
Penalty for first 12 months of lateness
This is a fixed penalty charged under Regulation 81(2)(a) Social Security (Contributions) Regulations 2001 which imposes a penalty of the “relevant monthly amount” for each month of failure to file.
81(4) For the purposes of paragraph (2), “the relevant monthly amount” in the case of a failure to make a return is–
(a)where the number of earners in respect of whom particulars of the amount of any Class 1A contribution payable should be included in the return is 50 or less, £100; or
(b)where that number is greater than 50, £100 for each 50 such earners and an additional £100 where that number is not a multiple of 50.
81(5) The total penalty payable under paragraph (2)(a) shall not exceed the total amount of Class 1A contributions payable in respect of the year to which the return in question relates.
Note the cap in Regulation 81(5) where the penalty cannot exceed the Class 1A NIC due. Therefore, if there is no Class 1A NIC liability, there can be no penalty.
If HMRC is expecting a form P11D(b), this penalty will be issued automatically by HMRCs system, and will be charged from the day the form P11D(b) is first late until the date it is received by HMRC.
This penalty is also charged if failure to submit a form P11D(b) is discovered as part of a HMRC compliance check. The date of receipt of form P11D(b) is usually then taken as the date the failure is discovered by HMRC. The penalty will then either be included in an informal contract settlement/letter of offer or a formal penalty assessment.
This penalty is fixed in legislation. Reduced amounts cannot be negotiated as part of a contract settlement with HMRC.
Penalty for Over 12 months of lateness
Regulation 81(2)(b) Social Security (Contributions) Regulations 2001 provides for a further penalty where the P11D(b) failure continues beyond 12 months.
As the penalty is based on the Class 1A NIC payable, there can be no penalty if there is no liability.
Based on the link to the Word.doc of examples in COG914050, HMRC also currently disapply a penalty under Regulation 81(2)(b) where the 81(2)(a) penalty has been capped to the Class 1A NIC due. HMRC state:
NOTE: Do not consider duty-geared penalties for any year where the fixed penalty has been capped.
The maximum penalty before abatements/reductions is equal to the amount of Class 1A NIC payable. So, the penalty starts at 100% of the Class 1A NIC payable. The penalty percentage can then be reduced for disclosure, co-operation and seriousness (Size and Gravity)
HMRC has discretion over whether to charge this penalty and should keep a sense of proportion when considering this penalty. A HMRC manager will decide what constitutes “proportionate” on a case by case basis.
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