Small Business.

Accountant urges small businesses to watch out for incorrect HMRC P35 fines  

An accountancy firm has warned the nation's four million SMEs to be wary of a large batch of inaccurate fines which have been issued by HMRC over the past few months in relation to the employer annual returns which have been submitted late.

North West accountants Mitchell Charles worth made the warning following the recent case of Hok Ltd v HMR&C, which saw the firm’s £400 fine for failing to file a P35 reduced to £100, because the penalty was not sent out until four months after the error was made.

A number of industry commentators have gone so far as to suggest that HMRC have deliberately delayed informing taxpayers that their P35's are late, as a tax-raising exercise.

Joanne Nieman, payroll manager at the firm, said a raft of companies have been hit by similar fines over the last month.

She is now urging any firm worried or concerned about fines related to the late filing of Employers Annual Return (P35) forms to contact a payroll specialist immediately.

“The fine structure has seen businesses being charged per month after missing the tax return deadline. But critically many of these firms weren’t informed until several months down the line. It is a ludicrous scenario because many businesses would have remedied the situation much earlier had they been made aware.”

"Many firms have taken the matter to tribunals and have been successful in getting these fines waived through formal appeals.

“Many new cases came to light in recent weeks when the HMRC issued penalty notices for late P35s. This led accountants and lawyers to warn company owners to check their post.”

Penalty Notice system is flawed

Mrs Nieman said HMRC designed the timetable for issuing penalties to allow a reasonable period for employers to give notice if they have no return to make.

She added: “There are real problems with this penalty notice system. A number of first tier tax tribunal judges have criticised HMRC for not issuing penalties earlier. We would advise anyone who feels a fine issued against them is unfair or excessive to seek help and challenge the appeal.”

Interestingly, Mitchell Charlesworth says that a number of its clients have received penalties for non-submission of their P35 forms, despite submitting 'nil returns' via the HMRC website.

The firm said that even though submission receipts were emailed to firms, nil return submissions had not been recorded.

Many other small business accountants we are aware of have reported similar issues with their own clients over the past few weeks.