Orange & Gold Blog

HMRC relents on multiple P35 penalties

HMRC has agreed a new approach to PAYE late filing penalties with professional tax bodies to lessen the number of companies receiving notices for £400+ fines in September each year.

As part of its initiative to improve service standards, the tax department worked with the bodies to tackle some of the most aggravating issues, one of which was the way companies were hit by hefty fines out of the blue. When the new joint working group got started in autumn of 2011, the P35 penalty problem was identified as a major issue that needed early resolution. The group tabled this to be resolved before the end of March 2012.

The issue became increasingly acute when tribunals started dismissing penalty levies where the judges thought HMRC’s approach amounts to revenue-raising rather than enforcing the deadline.. Judge Geraint Jones effectively brought the credibility of the penalty system into question with his ruling in HOK v HMRC, a decision which has subsequently been followed by other tribunal chairs. HMRC appealed Hok, but essentially Judge Jones had ruled that the penalty system was unfair in seeking a £400 penalty at the first point. Employers were not able to rectify their mistake when the penalty was £100, which the Judge ruled unfair. Orange & Gold has an appeal ongoing on behalf of one of our clients and we await a reversal of the existing decision from HMRC.