What is the P35? Do I need to do one?

When you operate a payroll (you have employees), you are required to file an annual return every year. It's done by filing a Form called P35 (even though it's now done electronically). The deadline is May 19th and if you fail to do it in time you will you incur steep penalties. The penalty is £100 per month late and per 50 employees. Moreover, HMRC tends to be very slow in issuing those penalty letters which means that when you receive the first letter, it will most probably be months later and the penalty will have already accrued in the hundreds of pounds.


There are some instances however where you might have a PAYE scheme in place but where a P35 isn't actually due. For example:

• The business used to have employees but not in the current year and the PAYE Scheme itself was 'open' in 2011/12
• The business has a Construction Industry Scheme (CIS sub-contractors operating for it but no actual employees) - a PAYE reference is required in order to manage CIS payments but there is no actual PAYE liability per se.

HMRC has confirmed that, in neither case is a Form P35 required and no penalties are due if one is not received. However, since the PAYE scheme is in place, penalty notices will nevertheless be issued automatically, which will then need to be appealed. The better option is to avoid all this paperwork is to inform HRMC that no P35 is due. It can be done online on the HMRC web site.

Happy filing!