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HMRC internal manual

Construction Industry Scheme Reform Manual

From
HM Revenue & Customs
Updated
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Late Return Automatic Penalties: Penalties chargeable under FA09/SCH55

CISR65600 Action Guide contents
   

FA09/SCH55 provides for CIS penalties to be charged where a contractor fails to submit a return or nil return by the due date. The commencement date for penalties under FA09/SCH55 will be 29 October 2011, although the first such penalties will not be issued until 29 November 2011 for the return month to 5 November 2011.

Penalties under this section can be issued in ‘fixed’ amounts, but a ‘tax geared’ element of the penalty will be charged where the monthly return is received more than 6 months after the first penalty for that return was issued.

Unlike CIS penalties charged under TMA70/S98(A)(2)(a), CIS penalties under FA09/SCH55 are issued as set out below irrespective of how many subcontractors there are on the monthly return.

In addition the rates of tax geared penalty will be different as shown in the table below;

the behaviour is not deliberate tax geared penalty - 5%
   
the behaviour is deliberate but not concealed tax geared penalty - 70%
the behaviour is deliberate and concealed tax geared penalty - 100%

The majority of CIS penalties charged will be where the behaviour is not deliberate and these penalties will be covered in this guidance. Behaviour is not considered to be deliberate where there is no evidence that the contractor has deliberately withheld the information in order to avoid any liability that they may have to HMRC.

Guidance on tax geared penalties for the other behaviours can be found as follows;

* the behaviour is deliberate but not concealed CH62400
   
* the behaviour is deliberate and concealed CH62400

Penalties to be charged

Where the behaviour is not deliberate the CIS penalties charged will be as follows;

First fixed penalty (FP1)

  • Monthly return remains not filed at 19th of the month - For the first month that a return has not been logged by 19th of the month the contractor will be liable to a penalty of £100. The 20th of the month is regarded as being the ‘penalty date’.

Second fixed penalty (FP2)

  • Monthly return remains not filed at the date 2 months after the penalty date - the contractor will be liable to a penalty of £200.

First tax geared penalty (TGP1)

  • Monthly return remains not filed at the date 6 months after the penalty date - the contractor will be liable to a penalty of 5% of any CIS deductions shown on the return in question or £300, whichever is the greater.

Second tax geared penalty (TGP2)

  • Monthly return remains not filed at the date 12 months after the penalty date - the contractor will be liable to a further penalty of 5% of any CIS deductions shown on the return in question or £300, whichever is the greater.

There is a table on the CIS Intranet site which illustrates the CIS penalties chargeable under FA09/SCH55 where the contractor is not a ‘New contractor’.

New contractors

There are special rules for tax geared penalties for new contractors. These are contractors that have never filed a CIS monthly return (CIS300). See also CISR65080 for the definition of a new contractor.

The special rules are as set out below where the behaviour is not deliberate;

Fixed penalties

  • The total amount of the first and second fixed penalties is liable to a cap above which the level of the fixed penalties cannot exceed. This is known as capping and the maximum for the fixed penalties is £3,000 which applies to a capped period. A detailed explanation of what is a capped period is at CISR65080.

First tax geared penalty

  • Monthly return is filed later than the date 6 months after the date of the first fixed penalty - the contractor will be liable to a penalty of 5% of any CIS deductions shown on the return in question, (this is not subject to a minimum penalty of £300).

Second tax geared penalty

  • Monthly return is filed later than the date 12 months after the date of the first fixed penalty - the contractor will be liable to a further penalty of 5% of any CIS deductions shown on the return in question, (this is also not subject to a minimum penalty of £300).

If a monthly return is still outstanding at the 6 month and / or 12 month date after the date of the first fixed penalty, then no tax geared penalty will be issued until such time as the return in question has been logged and captured.

Allocating the return to a different scheme or period

A return that has already been logged can subsequently be allocated to a different scheme or period. This may occur if the contractor made a mistake completing the return or, the scheme or period details quoted were unreadable. In this case, any penalties due under FA09/SCH55 for the old scheme and period, for which the return will not now have been logged by the due date, will be raised (where the return was removed from the old scheme on 29 October 2011 or later) going back to either the month to 5 November 2011, or the date the contractor registered for CIS whichever is the later date.

Before this correction, penalties may have been raised for the new scheme and period possibly both under TMA70/S98A and FA09/SCH55 because there was no record of a return being logged by the due date. Such penalties will not be amended or cancelled automatically and it will be up to the contractor to appeal against the penalty or penalties issued.