Guidance

Penalties for CIS payments or returns connected to deliberate non-compliance

Published 15 September 2026

This factsheet tells you about the penalties we may charge if we’ve issued a determination under either section 62A or 62B of the Finance Act 2004 for the Construction Industry Scheme (CIS).

For the purposes of this factsheet:

• ‘deliberate non-compliance’ means a person or business has deliberately failed to meet their CIS or PAYE obligations
• ‘connected party’ is anyone within the immediate construction contract or other contacts tied to the same construction operations

This factsheet is one of a series. For the full list, go to GOV.UK and search ‘HMRC compliance checks factsheets’.

When we may charge you a penalty

We may charge a penalty if a person or company makes a payment for construction operations, or claims a CIS credit in a return, and knew or should have known it was linked to deliberate non-compliance by a connected party.

A penalty can be charged:

• under section 72A of the Finance Act 2004 on payments made, or CIS credits claimed, after 6 April 2026
• of 30% of any amount we’ve determined under section 62A or 62B of the Finance Act 2004 — shown on a notice of determination
• on either the company or jointly with an officer of the company, if their actions gave rise to the assessed liability

What you can do to avoid a penalty

You can avoid a penalty by making sure your business doesn’t become involved in any transactions connected to CIS deliberate non-compliance.

You should review your assurance and due diligence practices and consider strengthening them to reduce your exposure to fraud and risk.

For more information about labour supply chain assurance, go to GOV.UK and search ‘Help with labour supply chain assurance — GfC12’.

How we work out the amount of a penalty

The penalty is based on the amount we determined you were liable to under section 62A or 62B of the Finance Act 2004. We’ll send you a notice of determination showing this amount.

The amount of the penalty will be 30% of the determined amount. For example, if the determination was for £1,000, then the penalty would be £300.

We may reduce the penalty amount.

The amount a penalty may be reduced will depend on the facts and circumstances of each case. We’ll consider things like if you:

• make full and meaningful admissions that save us time and effort
• accept our findings after we find a determination is required
• co-operate early — prompt co-operation will earn more penalty reduction than late co-operation

How we’ll tell you about a penalty

We’ll send you a notice of penalty determination. This will tell you (all of the following):

• how much the penalty is
• how we’ve worked it out
• how to pay the penalty
• what to do if you disagree

Company officer liability

A company officer may be liable to pay some or all of the company’s penalty if (both of the following):

• the company is liable to a penalty on the amount we’ve determined was connected to deliberate non-compliance under section 62A or 62B of the Finance Act 2004
• the actions that led to the penalty, were attributable to the company officer

This may include where the officer knew, or should have known, the company’s transactions were connected to deliberate non-compliance.

A company officer includes:

• directors, managers, secretaries, or shadow directors for a company, other than one whose affairs are managed by its members
• a member who exercises management function for a limited liability partnership (LLP) or other company
• shadow members, whose directions or instructions the members of an LLP are accustomed to act on — a person is not a shadow member if the members only act on advice given by that person in a professional capacity
• any individuals exercising functions of management for unincorporated associations

If the company pays the penalty in full, we won’t ask individual officers to pay.

If more than one company officer is liable, then we may divide the penalty between the company officers. When we decide how to divide the penalty, we’ll take into account each officer’s involvement.

How we’ll tell company officers of their penalty amount

Before we issue a liability notice to a company officer we’ll (do both of the following):

• tell them that we’re considering making them personally liable to pay a penalty amount
• give them the opportunity to tell us why we shouldn’t make them pay or how much they should pay

If we then send a liability decision notice, the company officer must, within 30 days, either:

• pay the amount shown in the notice

• appeal if they disagree that they’re liable to pay or don’t agree with the amount attributed to them

If you disagree

If we make a decision that you can appeal against, we’ll write to you and explain what you can do. You can usually:

• send new information to the officer dealing with the check and ask them to consider it
• ask for a review by an HMRC officer who has not been involved in the matter
• appeal to an independent tribunal

You must do this within 30 days of our notification.

You may be able to use Alternative Dispute Resolution (ADR). This involves a trained HMRC mediator helping you and the officer dealing with the check, work towards resolving the dispute. ADR does not affect your right to appeal or ask for a statutory review.

The officer dealing with the check will tell you if ADR is available for your dispute.

For more information:

• go to GOV.UK and search ‘disagree with a tax decision or penalty’
• read factsheet CC/FS21, ‘Alternative dispute resolution’ — go to GOV.UK and search ‘CC/FS21’

Your rights if we’re considering penalties

The European Convention on Human Rights gives you certain important rights. If we’re considering penalties, we’ll tell you. We’ll also tell you these rights apply and ask you to confirm that you understand them.

You have the right to:

• not answer questions we may ask you to help us decide whether to charge you a penalty
• choose how much you help us when we’re considering charging penalties
• get advice from a professional adviser when deciding whether to answer our questions
• appeal if you disagree with any penalties we’ve charged you
• apply for funded legal assistance for dealing with an appeal against certain penalties
• have penalty matters dealt with without unreasonable delay

You can find full details about these rights in our factsheet CC/FS9, ‘The Human Rights Act and penalties’. Go to GOV.UK and search ‘factsheet CC/FS9’.

If you need help

If you have any health or personal circumstances that may make it difficult for you to deal with us, please tell the officer who has contacted you. We’ll help you in whatever way we can. For more details, go to GOV.UK and search ‘get help from HMRC’.

You can also ask someone else to deal with us on your behalf. For example, a professional adviser, friend or relative. However, we may still need to talk or write to you directly about some things. If we need to write to you, we’ll send a copy to the person you’ve asked us to deal with. If we need to talk to you, they can be with you when we do, if you prefer.

More Information

Our privacy notice

Our privacy notice sets out the standards that you can expect from us when we ask for information or hold information about you. To read this, go to GOV.UK and search ‘HMRC Privacy Notice’.

If you’re not happy with our service

Please tell the person or office you’ve been dealing with. They’ll try to put things right. If you’re still not happy, they’ll tell you how to make a formal complaint.