The P35 Incentive

PAYE Incentive

There is an incentive in place to encourage small employers to voluntary file their 2004/5 employers annual PAYE return (P35) online in May 2005, for doing so you will receive a lovely £250 tax free. You can then get the £250 again next year and over the next 3 years in declining amounts. So in May 2009 it is possible to have received £825 (see below), but the problem is you won’t get the incentive for a nil return.

Problem

The P35 is only a legislative requirement if the return is due and just because an employer receives one doesn’t mean they have to file it. If there was no need to complete a P11 (tax deductions) working sheet or the subsequent P12 (PAYE and NI summary) then there is no requirement to file a P35.

Solution

There is as always a way around this, if you have a group of companies it is beneficial to arrange matters so that a director, rather then taking all their remuneration through one company, should decide upon having £50 paid to each of their companies which would either operate DO or BR PAYE codes, (Used when you have a second source of income and all your tax allowance has been included in the tax code applied for your first or main source of income.) This would mean all the companies would need to file a PAYE return and in doing so it would seem that each company would be able to receive the incentive payments.