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Electronic Filing Mandate

Are you ready to file electronically? Research by HM Revenue & Customs has revealed that some of you are not and could be at risk of facing penalties if you're left behind.

All employers are now obliged to file End of Year forms electronically - P14's & P35's

The 2009/2010 tax year sees two elements to the electronic mandate imposed on employers. On the one hand all employers, no matter what size, are now obliged to file their end of year returns: P14 and P35 electronically.

Electronic Filing MandateOnly accidental employers (e.g. those who employ someone to provide care or support services in or from home) or those who object on genuine religious beliefs, are exempt, along with a number of unique exempted employers who may be instructed by HMRC to file on paper.

The additional concession during the 2009/2010 tax year is for employers who ceased during the tax year and whose return is received by HMRC prior to 6th April 2010. However, this is the only year this exception is being allowed.

50 or more employees - In-Year Mandation

And on the other hand, employers with 50 or more employees are obliged to file their in year HMRC forms for starters and leavers. Failure to do so may result in penalties and fines.

Mandation came into force on 6th April 2009 for the electronic submission of both P45 and P46 from employer to HMRC.

In year mandation covers:

  • P45 Starter (Part 3)
  • P46
  • P46(PEN)
  • P46(EXPAT)
  • P45 Leaver (Part 1)

For the first three quarters of the tax year, HMRC are not applying penalties for failure to electronically file, so basically there are no penalties for failure during 2009.

However, HMRC will shortly issue letters to employers indicating their failure to in-year file if 5 or more paper forms have been received in each quarter of the tax year. From 1 January 2010, penalties will be applied on those employers who fall under the mandate and either fail to electronic file or continue to submit paper forms to HMRC. Of course there may be some employers who try and do neither for a period of time.

HMRC has confirmed that out of 47,884 employers who are legally obliged to file electronically, 5,122 have so far failed to file any forms electronically this year as of 1st September 2009. This accounts for 11% of the target employer population that may be facing penalties if their failure continues past 1 January 2010.

It may be that employers are still readying themselves prior to the penalty regime being put in place, but if some speedy corrective action and new systems development and implementation is not achieved shortly then HMRC are in for a windfall collection of penalties.

So what triggers the penalty? The submission of 5 or more paper forms, or the failure to submit an electronic message when one should have been submitted.

Employers who are generally filing electronically need to ensure that no paper forms are leaking through their business process systems directly to HMRC. Corrections should be made by letter notification and not the submission of a paper form. Employers are given a tolerance of 5 paper forms per quarter.

Once exceeded, penalties start kicking in and may prove expensive for some of the larger employers who insist on keeping paper forms going through the process.

Statistics held by HMRC show a dramatic increase of +85.5% in the flow of EDI form messages so far this year. Equally the rejection rate has dramatically dropped from the 11.6% failure rate experienced in 2008 to a 4.2% failure rate so far during 2009.

The big win gain, in-year receiving

Of course the major benefit of electronic exchange with HMRC for employers is the automatic handling of P6, P6B and P9 tax code updates and also the handling of Student Loan instructions straight into the payroll system.

Although the take-up of tax code updates by the 1,400 HMRC trading partner employers is exceeding 70%, only 34% receive electronic student loan notices

Act fast and act now

So for any employer who falls under the in-year filing mandate, who are not currently complying, act fast to avoid the penalties.

Simon Parsons

To find out how Ceridian’s Managed P35 Filing service can help you cut down administration and avoid fines and penalties, speak to one of our expert consultants by calling 0800 0482 737

  • 1st December 2009



Sara Lyon

Big Win - In Year Receiving

Unfortunately not with Source - Student loan notifications do not feed through to the employees record, causing more work to audit the system as HMRC have stopped sending paper copies, not a WIN situation for Source users


P Simon Parsons

Big Win - In Year Receiving - even for Source users.

Student Loan notification feed through to payroll even for Source users. Thanks for pointing out a potential issue with these not being transferred across into the HR element of Source, we’ll look into that. Source payroll applies the HMRC detail for student loans and also the audit trail reflects the changes on Ceridian Online Reporting and the amendment files used for payroll audit.

Of course the major win for most employers is the receipt of new tax codes, the P9, P6B (budget) and P6 codes that flow through the year.

If you need electronic P9 for this coming new tax year, order electronic exchange before February 2010 else it will be too late for P9’s as HMRC create them in February for April payroll application.

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