Tribunal Criticises HMRC for Delay in Issuing Penalties

HMRC have been criticised for delaying issuing penalties for late forms P35 (Payroll end of year forms) several months late, which generates more penalties than were necessary.

The case referred (TC01286: Hok Ltd) concerned an appeal against a penalty of £400 for late filing of the 2009/10 P35.  The penalty was calculated at £100 per month for four months.  In October 2010 a further penalty of £100 was issued, given that filing had taken place on 15 October once the company had been alerted to its default.  The company acknowledged that it was wrong and that HMRC was entitled to levy a penalty.  However, the company argued that, if HMRC had notified it of its default, it would have been remedied at a far earlier time, thus avoiding ongoing penalties.

The tribunal stated that :
“.... HMRC deliberately waits until four months have gone by and does not issue the first interim notice, until, as in this case, September of the year of default”.

“There can be no logical reason whatsoever for HMRC to delay sending out a penalty notice for four months so that, in effect a minimum penalty of £500 will be levied unless the taxpayer unilaterally realised that it has failed to undertake the necessary filing”.

“In our judgement it would be a very simple matter for HMRC to set its computer settings so that a default or penalty notice was sent out immediately after the 19 May  in any year, instead of some months later.”