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9:29am Friday 18th May 2012 in Business
AN HMRC spokesman said recently that HMRC wanted returns, not penalties for failing to file them. But while HMRC may now be trying to help employers avoid penalties, it doesn’t mean penalties won’t be charged.
This month, I want to look at some potentially expensive traps employers can fall into and how they can be avoided.
All employers must file a P35 ‘end of year’ return for 2011/12 on or by May 19. Failure to do so will incur a penalty which increases for every month the return is outstanding.
Virtually all employers have to file this return online rather than as a paper return. Many employers only realised that they had incurred penalties last year after four months’ worth had accrued.
This year, HMRC has already sent two reminder letters to employers in an effort to reduce the number who incur penalties.
Beware of a trap many fell into last year: electronic returns can be sent in ‘test’ or ‘live’ mode and even if a test return has been sent, the live return must be submitted to avoid a penalty – so read the on-screen message carefully to ensure you have sent the right kind.
There are also financial penalties for failing to pay over PAYE to HMRC on time. Even a day’s delay will cause penalties to accrue. The days when PAYE could be paid late as a source of “free” finance have gone.
And, in addition to the penalties for late payment, failures can also cause the withdrawal or refusal of gross payment status under the Construction Industry Scheme (CIS).
Losing CIS gross payment status can have a devastating effect on cash flow.
And, don’t forget, the P11D(b) benefits return and Form 42 (to report shares issued to employees) which have to be filed by July 6.
What can you do to avoid the penalties?
You can mark the calendar in your accounts office to show the due dates, or better still use the email alert service provided on the Business Link website at www.businesslink.gov.uk/bdotg/action/keydates which covers PAYE, CIS, VAT, Corporation Tax, Self-Assessment, and Companies House filing dates.
You can also sign up for the new HMRC Business Tax Dashboard which enables you to see your overall business tax situation at a glance – the details are at http://www.hmrc.gov.uk/online/dashboard.htm.
No business can afford unnecessary costs – and tax penalties are, in most cases, entirely avoidable.