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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
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Supporting Guidance: employer compliance: guidance by subject: penalties: CIS from 06-04-07 - incorrect monthly returns - pre April 2009

You do not use the PDAC when calculating these penalties.

Section 98A(4) TMA 1970 provides a duty geared penalty for fraudulently or negligently submitting an incorrect return for the returns due to be filed by 19th March 2009 COG914085.

The maximum penalty before abatements is an amount equal to the difference between the amount returned and the amount which should have been returned.

For example, a form CIS300 which returns £8,000

  • where it is later demonstrated that
  • £14,000 of CIS deductions should have been returned
  • attracts a maximum penalty before abatements of £6,000.

Some practical examples of calculating penalties for incorrect returns (Word 32KB) are attached.

Because the CIS300 return is a monthly return it is important that you

  • give the contractor advice on how to correct mistakes at the earliest opportunity.

This will assist the contractor in making sure that subsequent returns are correct.

Note that these penalties are based on 100% of the tax difference or the tax underpaid and are subject to Article 6 of ECHR COG906050.

You should

  • provide HRA advice and
  • issue factsheets CC/FS7a and CC/FS19

to the contractor at the earliest opportunity COG906060.

If it has been necessary to issue formal determinations consideration should be given to also issuing penalties COG914175 at the same time.

Schedule 24 of FA2007 applies to returns due to be filed on and after 19th April 2009. Refer to the Compliance Handbook for more information.