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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: penalties: CIS from 06-04-07 - raising formal penalty determinations

You do not use the PDAC when calculating the S98A penalties.

Before proceeding to raise formal penalty determinations you must read COG914180 which explains the initial action to be taken on all cases when raising formal penalty determinations.

Wherever possible penalties for failure to submit a return should be either:

  • included in a contract settlement
  • included in a formal penalty determination, or
  • issued by the appropriate IT System (CISR - note: from October 2011 we can no longer issue automated Section 98A penalties for late CIS returns via CISR).

When proceeding to raise formal penalty determinations for

  • failing to submit a CIS300 return on time from 6 April 2007 to 5 October 2011 (under S98A(2)(a) & (b) TMA 1970) and/or
  • failing to submit a CIS300 return on time from 6 October 2011 (under Sch55 FA 2009)

you will

  • follow the guidance at COG914290 and COG914295 to determine the penalty arising under S98A(2), and/or
  • follow the guidance at CH62300+ to determine the penalty arising under Sch55, then
  • complete an AO Report Form - Authorisation Stencil (available via SEES - forms and letters)
  • complete a CIS Penalty Determination for S98A(2) penalties and/or CIS Penalty Notice for S55 penalties (both available via SEES - forms and letters). A single determination and/or notice should cover all periods and years for we are charging penalties for. The penalty notice will be issued with a schedule to show the penalties payable for each individual tax month for which the contractor has incurred penalties in each tax year (Note: dates and amounts can be cut and pasted from the Excel calculator used to calculate the penalties), and
  • refer the case to the Authorising Officer.

The Authorising Officer will

  • consider the information provided
  • determine the penalty (if appropriate)
  • refer the papers back to you.

Once the Authorising Officer has agreed the penalties you must

  • complete and issue the Penalty Explanation letter (PEL) and the Penalty Schedule (EC-CIS2), (available in SEES forms and letters), Note: the PEL is created by the PDAC if you are charging an over 12 month  failure to file penalty for deliberate witholding of information
  • BF the case for 30 days.

 New information received

You must review the information and consider whether or not you are satisfied that the contractor has a reasonable excuse for the late returns.

If you are satisfied you must seek agreement from the Authorising Officer and

  • if they agree with your decision, write to the contractor to tell them that
    • we accept that they have a reasonable excuse for the late returns and
    • we will not charge them a penalty
  • if they disagree with your decison, write a letter giving your reasons why. Issue this letter along with the penalty notice and payslip after following the guidance in the section ‘No new information received or no reasonable excuse’ below.

If you are not satisfied you must seek agreement from the Authorising Officer and

  • if they agree with your decision, write a letter giving your reasons why. Issue this letter along with the penalty notice and payslip after following the guidance in the section ‘No new information received or no reasonable excuse’ below.
  • if they disagree with your decision, write to the contractor to tell them that
    • we accept that they have a reasonable excuse for the late returns and
    • we will not charge them a penalty.

No new information received or no reasonable excuse

You must

  • complete a Manual CIS Penalty Stencil (available via SEES), and
  • email to DL-DMB Safe Team 1. They will create a SAFE charge and return the stencil to you advising the SAFE reference
  • use the SAFE reference to create a payslip
  • issue the payslip, penalty determination/notice (EC-CIS3), (available in SEES forms and letters), along with a copy of the penalty schedule to the contractor, and
  • BF the case for 30 days.

If you charge a penalty for a 12 month failure to file and deliberate withholding of information, see CH402254, by this method, do not enter it onto the National Penalty Processing System (NPPS). If the penalty is entered onto NPPS, the taxpayer will be charged twice.

If the employer or contractor appeals against any penalty determinations, you should follow the guidance at COG914305. Note, you must use the Manual CIS Penalty Stencil to notify DM if a penalty is to be stood over or released following an appeal.

See the Compliance Handbook for

  • penalties for inaccuracies in returns and other documents with a filing date on or after 1 April 2009, where the return relates to a tax period beginning on or after 1 April 2008 (CH83000+)
  • penalties for failure to file CIS monthly returns with a filing date on or after 19 November 2011 (CH64000+), and
  • failure to comply with an information notice issued on or after 1 April 2009 (CH26800+).