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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 separate determination and/or notice is required for each tax year and will be issued with a schedule to show the penalties payable for each individual tax month for which the contractor has incurred penalties in that 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.

You will then

  • 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 and penalty determination/notice 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 DMB if a penalty is to be stood over and/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+).