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HMRC internal manual

Construction Industry Scheme Reform Manual

Late Return Automatic Penalties: Soft Landing Period

CISR65600 Action Guide contents

The soft landing period commenced from 6 April 2007 and continued through to the 5 September 2007 inclusive. HMRC did not raise penalties for any monthly returns (CIS300) issued during this period that remained outstanding by the 19th of the given month. The final return period that this related to was 5 September 2007.

Monthly returns which were not received by the filing dates relating to this period were identified by the system and, on the first occasion that a return was late during the soft landing period, a penalty warning letter - IDMS 16(F) - was issued, but no penalty charged. No further warnings were sent for the duration that a particular return was outstanding during this period. The warning letter advised contractors that their late filing could lead to the loss of their gross payment tax status and that from October 2007 HMRC will begin to charge CIS penalties. From October 2007, IDMS issued different versions of the warning letter - IDMS16(A - E) - to contractors for outstanding returns and a quarterly statement informing them of all penalties due.

On 29 October 2007 the CIS system identified all returns that were due (including returns for the period May 2007 to September 2007), but which had not been received by 19 October 2007. All of these returns then attracted their first penalty (Penalties were not however raised retrospectively back to May 2007 for returns for earlier months but still outstanding at 19t h October 2007). The Strategic Accounting Framework Environment (SAFE) was then instructed to issue penalty notices to these contractor schemes. This applied to all schemes provided the business address was not RLS, the contractor was not insolvent or deceased or the signals ‘Inhibit Output’ or a penalty inhibition had not been set. An example of the penalties that could be issued follows;

Return Month Due date Received date Penalty due
May 2007 19th May 2007 21st November 2007 £200 (2 months @ £100)
June 2007 19th June 2007 21st November 2007 £200 (2 months @ £100)
July 2007 19th July 2007 21st November 2007 £200 (2 months @ £100)
August 2007 19th August 2007 21st November 2007 £200 (2 months @ £100)
September 2007 19th September 2007 21st November 2007 £200 (2 months @ £100)
October 2007 19th October 2007 21st November 2007 £200 (2 months @ £100)
November 2007 19th November 2007 21st November 2007 £100 (1 month @ £100)

Only one penalty for each outstanding return was issued to a contractor scheme at 29 October 2007 irrespective of the number of returns which remained outstanding from that scheme at 19 October 2007. However, the rules applied as normal regarding the issue of any final penalties due when the return is outstanding for the thirteenth month. See CISR65040 for details of the penalties chargeable under TMA70/S98A.

In exceptional circumstances HMRC may decide that certain late penalties should be inhibited or not charged at all. See CISR65090 for information relating to Penalty Inhibition.