Tribunal – late submission of P35
The First-tier Tribunal recently heard a taxpayer’s appeal against penalties for late submission of the P35 for the tax year ended 5 April 2011. The P35 should have been filed by 19 May 2011 but was not filed until January 2012 resulting in penalties totalling £800. There is a penalty of £100 per 50 employees for each month the P35 is outstanding.
The taxpayer in this case ran a large professional pensions practice in Manchester. The taxpayer was assisted by his accountant and it was unclear to whom HMRC had sent a notice on 13 February 2011 reminding the taxpayer that he was required to file a P35 by 19 May 2011. A penalty notice was sent in September 2011 for £400 in respect of the failure to lodge the P35 for the 4 months from May 2011 to September 2011. By this time, the taxpayer was in the process of changing accountants and it is unclear to whom the penalty notice was delivered.
In December 2011, a demand for payment of the £400 penalty was sent to the taxpayer who instructed his new accountant to deal with HMRC in respect of payroll issues. The formalities of appointing his accountant as agent took some time and it was not until 11 January 2012 that the P35 was submitted. This delay resulted in a further £400 penalty being due.
The taxpayer contended that he had a reasonable excuse for late submission of the P35. The Tribunal clearly disagreed with this contention. They commented:
‘the burden is on the appellant to satisfy us that it had a reasonable excuse for not lodging the P35 in time. On the basis of the evidence before us we cannot be satisfied that there is any reasonable excuse.’
The appeal was dismissed. In many cases, employers are unaware that their returns are late until they receive a first penalty letter in September covering a four month period of accrued penalties (a minimum of £400). It is important that businesses are fully aware of their filing obligations in order to avoid these type of penalties.