Tax penalties: P11Ds

Notes: updated re: penalties for errors 26 May 2010

At a glance

Due dates

Form P11D and P11D(b) submission deadline: 6 July following tax year.
Payment date of Class 1 A NIC: 19 July following the tax year (22 July if paid electronically) unless business ceases.
If business ceases, due 14 days after the end of the final tax month of trading.

Penalties

Non-submission or overdue:

Form P11D:£300 initial penalty per return plus £60 per day until submission

Form P11D(b):£100 per every 50 employees (or part of 50) per month or part month.

Penalty notices for non-submission are issued in November following the filing deadline and again in March and July in the next calendar year.
There are different deadlines for when a business ceases dependent on the date of cessation

Incorrect P11D and P11D(b)returns:

A penalty is based on a % of potential revenue lost according to taxpayer behaviour and degree of culpability or guilt:

100% (deliberate and concealed action)
70% (deliberate but not concealed action)
30% (careless action)
0% (genuine mistake, after taking reasonable care)

Late payment of Class 1A NIC

Non-payment Class 1A NIC: statutory interest charged immediately from 19 July (22nd if paid electronically)

Form P11D: Completion is required by an employer if it reimburses an employee with any expenses that are not covered by a PAYE dispensation , and in respect of any taxable benefits made available to an employee by the employer or via a third party, during the course of the tax year.

Form P11D(b): the Return of the Employer's Class 1A National Insurance contributions due on the taxable benefits and expenses declared on its employee's P11Ds.
Employers are required to provide all of their employees (and former employees if requested) with a completed form P11D which shows the cash equivalent of all benefits in kind and expense payments made to each employee who earns £8,500 or more a year including benefits.
A P11D will be required for any director unless he meets certain qualifying conditions.
The P11D and P11D(b) forms can be completed and submitted together by post or online.
When the employer is not required to complete any P11Ds it ticks a box on form P35 to confirm this.
A penalty may lead to increased ‘risk profile’; late payment or late submission may contribute to the loss of gross payment status for CIS.

Non Submission

Failure to submit forms P11D by the 6 July deadline will produce an initial penalty of £300 per return plus £60 per day until submission.
Failure to submit form P11D(b) by the 6 July deadline will produce a penalty of £100 per every 50 employees (or part of 50) per month, or part month until payment.
The first penalty notice is issued automatically by the HMRC computer system after 6 November; charging a penalty for 4 months.
Further penalty notices are issued after 6 March and 6 July of the next calendar year if still not submitted.

Errors

P11D errors are easily made on P11D forms as a result of the mass of data required in preparation.
Penalties for errors made on the P11D and P11D(b) forms, whether resulting in a loss of tax or Class 1A NICs are levied as for other errors in returns and documents.

Unpaid tax

HMRC will charge up to three penalties of 5% of the amount of Class 1A NICs that are due, depending on the length of time that the amount remains unpaid as follows:

Penalty % of amount not paid

When paid

1 - 29 days of due date

30 days of due date (ie 6 Aug)

10%

6 months of due date (ie 6 January following the tax year end)

15%

12 months of due date

The same penalties also apply to amounts overdue in PAYE settlement agreements.

A penalty will not be charged if HMRC agrees that there is a reasonable excuse for the payment being late and payment was subsequently paid as soon as was reasonable after the reason for lateness ended.
‘Reasonable’ will differ from business to business depending upon the individual circumstances but will normally be an unpredictable event.

Interest on late payment

Statutory Interest on late payment is charged on payments received after the due date of 19 July (22 July if paid electronically) following the end of the tax year.
Implementation of interest harmonisation is to take place over a period of time enabling HMRC’s computer upgrade in stages. HMRC has confirmed that no interest will be charged before 2012 in relation to PAYE late payments.

Cessation of business

When a business ceases, Class 1A contributions may be due earlier than the normal 19 July payment deadline.
Payment of all outstanding PAYE tax and NICs (including Class 1A NIC payments) is required within 14 days (17 days if paid electronically) of the end of the last tax month (or quarter if the usual in-year payment date was quarterly) in which final payments of ‘general earnings’ are made to an employee (Regulation 73(4) Social Security Regulations 2001).
Depending upon the circumstances this could be some time before (or even after) the date of cessation for trading purposes.
The forms are submitted in-year rather than waiting for the year end.