28 Nov 2005

All employers will be required to file their end of year PAYE returns electronically by 2010.

E-filing means sending in the end of year forms P35 and P14 by either:

• Internet service for PAYE; or
• Electronic Data Interchange (EDI) service; or
• using an intermediary, such as a payroll bureau or agent.

CD ROM and floppy disk are not considered electronic.

The requirement will be phased in gradually. The compulsory electronic filing date will depend on the number of employees.

Large employers were required to start paying tax and other deductions electronically in May 2004 and file returns online in May 2005. The deadline for online filing for medium sized firms is May 2006. The date for smaller firms has yet to be confirmed. However, small firms who start filing online early can get up to £825 tax-free from the Revenue over five years, beginning with returns for the year 2004/5.

A penalty of up to £3,000 per annum per PAYE scheme will be introduced for those who fail to comply. This will be in addition to the existing late filing penalty.

More information and details of accredited software can be found on the HM Revenue and Customs website.