When declaring your business’s expenses, benefits and Class 1A National Insurance contributions, you will need to make sure that you complete a P11D form, which includes details of expenses payments, benefits and any facilities that have been given to your employees or directors.

A separate form should be used for each relevant employee or director, although you do not need to fill this form out if expenses and benefits have been taxed through the payroll system or if there are no taxable benefits, payments or expenses to be returned for each individual.

These forms will need to be submitted by a specific date each year and penalties will be incurred for late submissions of both. Here’s a guide to help you understand these penalties and why late submissions should be avoided.

Penalties for late submission of P11D

Under Section 98(1)(b) of the Taxes Management Act 1970, there is a maximum initial penalty of £300 per form if they aren’t received by HMRC by July 6th after the end of the tax year. Section 98(1)(ii) provides for further penalties of up to £60 a day until the failure has been remedied.

However, because HMRC has to make an application to the First Tier Tribunal to impose these penalties and, as such, it is rare for the organisation to charge any penalties for late submission of P11D forms. Guidance on the topic can be found at COG914060.

Penalties for late submission of P11D(b)

If the P11D(b) form doesn’t reach HMRC by July 6th after the end of the tax year, a penalty will be charged. There are two types of penalty that can be applied, with guidance to be found at COG914055. For both penalties, appeals can be made if there is a reasonable excuse for the delay in submission.

Penalty for the first 12 months of lateness

Under Regulation 81(2)(a) Social Security (Contributions) Regulations 2001, there is a fixed penalty charged for the first year of lateness, imposing a penalty of the “relevant monthly amount” for each month of failure to file.

The relevant monthly amount is:

• Where the number of earners in respect of whom particulars of the amount of any Class 1A contributions payable should be included in the return is 50 or less, £100, or…
• Where that number is greater than 50, £100 for each 50 such earners and an additional £100 where that number is not a multiple of 50.

The total penalty payable shall not exceed the total amount of Class 1A contributions payable in respect of the year to which the return in question is related.

There is a cap included in Regulation 81(5), where the penalty cannot exceed the Class 1A NIC due. Therefore, if there is no Class 1A NIC liability, there can be no penalty issued.

If HMRC is expecting a form P11D(b), this penalty will be issued automatically by HMRC’s system and will be charged from the day the form P11D(b) is first late until the date it is received by HMRC.

This penalty is also charged if failure to submit a form P11D(b) is discovered as part

of an HMRC compliance check. The date of receipt is usually then taken as the date the failure is discovered by HMRC. The penalty will then either be included in an informal contract settlement/letter of offer, or a formal penalty assessment.

This penalty is fxed in legislation. Reduced amounts cannot be negotiated as part of a contract settlement with HMRC.

Penalty for over 12 months of lateness

Further penalties can be applied under the Regulation 81(2)(b) Social Security (Contributions) Regulations 2001 if failure to submit continues beyond 12 months. As the penalty is based on the Class 1A NIC payable, there can be no penalty if there is no liability, with further information to be found at COG914050.

HMRC also currently disapplies a penalty under Regulation 81(2)(b), where the 81(2)(a) penalty has been capped to the Class 1A NIC due. The organisation states:

Do not consider duty-geared penalties for any year where the fixed penalty has been capped.

The maximum penalty before abatements/reductions is equal to the amount of Class 1A NIC payable. So, the penalty starts at 100% of the Class 1A NIC payable. The penalty percentage can then be reduced for disclosure, cooperation and seriousness (Size and Gravity).

HMRC has discretion over whether to charge this penalty and should keep a sense of proportion when considering this penalty. An HMRC manager will decide what constitutes “proportionate” on a case by case basis.

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