IR35 FAQ update- Computation and Penalties on P35s

The Inland Revenue's IR35 Frequently Asked Questions page has been updated with a question and answer regarding computation and penalties arising from the P35 form...

Q. The Inland Revenue's IR35 Penalty Statement says that no penalties will be sought for an incorrect return (P35) for any deemed Schedule E payment for 2000/2001, as long as certain conditions are met. Has this arrangement now been withdrawn?

A. No. This arrangement will continue until Government Ministers announce a change. So no penalty will be sought for an incorrect return (P35) for any deemed Schedule E payment for 2001/02 as long as:

• The return (P35) is submitted by 19 May 2002;
  
• The return (or a covering letter) says that the service company legislation applies to the employer;
  
• An amount is included in the return for the tax and NICs due on the deemed Schedule E payment;
  
• It is made clear in a covering letter that the amount is provisional pending finalisation of the deemed Schedule E payment calculation;
  
• A correction to the return and accompanying documents, notifying the correct final amount for the deemed payment and the tax and NICs due is made by 31 January 2003;
  
• Any additional tax and NICs due as a result of the correction to the return are paid by 31 January 2003.

Kevin Miller, PCG Director, said: "We are pleased to see that the Revenue have confirmed that the penalty concessions regarding IR35 should remain in place. This recognises that even two years after the introduction of IR35 the practical problems and uncertainties for contractors remain as great as ever."

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Richard Powell, UKTECH