Original content provided by BDO UK.
Like many employer reporting deadlines, the final date for filing P11Ds for your employees, the employer’s P11D(b), and the Employment Related Securities (ERS) online annual return is 6 July after the end of the tax year. So, what happens if you miss the deadline?
Late filing penalties
Well, the first thing you may see is that HMRC will send you a penalty notice.
As your P11d(b) sets out the amount of Employer’s Class 1A NIC payable on the employee benefits in kind you provided, it is perhaps no surprise that not filing it on time triggers a penalty. HMRC will charge an automatic penalty of £100 for each 50 employees for each full month that the return is late.
On top of this, if you didn’t pay the NIC due by 22 August (ie 30 days after the due date), HMRC will add a 5% penalty to the amount of NIC due. This penalty rises to 10% after 6 months, and 15% after 12 months and, of course, HMRC will always charge interest on late payment of any tax.
HMRC can also request that a penalty of £300 per P11D submitted late is charged, but this has to be done through the First-tier Tax Tribunal (FTT). If the FTT agrees to issue such penalties, a further £60 per day can be charged until the employer puts things right.
In the case of late-filed ERS returns, unless there is a reasonable excuse for the late submission, an initial penalty of £100 will be charged, followed by:
- A further penalty of £300 if the return is filed three months after the due date
- A further penalty of £300 if the return is filed six months after the due date
- If HMRC so decides, a daily penalty of £10 if the return is filed nine months after the due date, or later.
For certain tax-advantaged share plans the late submission of the annual return may also result in the loss of tax relief.
What if you made a mistake?
Submitting a P11D or P11D(b) that contains incorrect figures can be expensive, even if it was filed before the 6 July deadline. Exactly how expensive depends on the nature of the error and what you do to put it right.
When HMRC learns that a form you have submitted is incorrect, it will charge a penalty calculated as a percentage of the tax lost as a result. For example, any penalty charge on a low value error will be minimal – but it is always sensible to put things right if you notice a mistake.
Penalties for errors are charged on a sliding scale based on the taxpayer’s behaviour, and take into account who spotted the mistake: if HMRC “prompts” you to correct a mistake, the penalty charged will always be higher than if you voluntarily tell HMRC about the mistake and put it right:
|
Behaviour of the employee
|
Penalty range for voluntary disclosure
|
Penalty range for ‘prompted’ disclosure
|
|
Careless
|
0% to 30%
|
15% to 30%
|
|
Deliberate but not concealed
|
20% to 70%
|
35% to 70%
|
|
Deliberate and concealed
|
30% to 100%
|
50% to 100%
|
Unsurprisingly, there have been many disputes about what constitutes “careless” and “deliberate” behaviour when penalties arise, but one thing is certain - trying to conceal a mistake is never a good idea: it can result in you paying twice the amount of tax that was due in the first place.
In the case of ERS returns which contain a careless or deliberate inaccuracy, a penalty of up to £5,000 can be charged.
What to do if you are not sure?
The worst thing that an employer can do is to leave a potential problem unresolved. In our experience, those employers who let unresolved reporting concerns run on for a number of years can end up facing some eye-wateringly large penalties when they are finally put right, as monthly penalties and interest can quickly add up. Worse still, if HMRC identifies that you have made mistakes, or even just missed filing deadlines, this will start to affect your “risk profile”. HMRC knows that if a business makes mistakes or is late with some tax forms, it may well be making mistakes with others: repeated errors can lead to detailed tax enquiries into all your tax affairs, which are expensive and time-consuming to resolve.
It is always prudent to get any uncertainties over P11D forms you have submitted checked out by an expert, so that you can quickly be put right if anything is wrong. For help and advice on your P11D filings, please get in touch with our local team (listed on the right).