P35 is a statutory obligation, not a negotiating tactic

The company appealed against penalties under TMA 1970 s 98A for late filing of form P35 for 2010-11. The due date was 20 May 2011 but the return was not submitted until 30 January 2015.

The taxpayer argued that it had a reasonable excuse for not filing the return. It had overpaid PAYE of about £5 000 for the three years to 2009-10 and had sought repayment or set off the amount from HMRC.

The Revenue was suspicious about why overpayments had been made. It turned out that the company had set up a system of paying a set amount of PAYE each month to HMRC based on one-twelfth of the estimated amount due for the year. Those calculations were consistently over-prudent and as a result the company had paid too much PAYE.

HMRC agreed to repay the excess on receipt of the P35 for 2010-11....