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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: Contractor appeals and there is a long period where no payments have been made subcontractors

CISR65600 Action Guide contents
   

If an appeal is made against CIS penalties and, before deciding whether the appeal may be upheld or not, you notice the following;

  1. there has been a long period of consecutive CIS monthly returns for which the contractor has made no payments at all to subcontractors for these months, or
  2. the contractor claimed ‘Inactivity’ for two or more consecutive periods of at least six months each but, despite this, CIS penalties have still been issued during this period

then you should treat the contractor as being someone who was not making payments to subcontractors for this period and therefore there is no requirement for them to file CIS monthly returns during these months. Any CIS penalties issued, relating to this period, may therefore be reduced to nil either by upholding any appeal made by the contractor, or by vacating the CIS penalties where no appeal has been made.

If payments to subcontractors then recommence, and then cease again, the contractor will have to show another long period of consecutive nil returns or ‘Inactivity’ in order for any CIS penalties issued for this second period to be reduced to nil.

Example 1

ABC Ltd files CIS monthly returns with payments to subcontractors shown on them until the month ending 5 October 2011. From the return to 5 November 2011 up to and including the return for month ending 5th October 2012, the CIS monthly returns show no payments at all being made to subcontractors. You may accept that the requirement to file a CIS monthly return actually ceased as at 5 October 2011, and any CIS penalties issued for the period ended 5 November 2011 up to and including the return ending 5 October 2012 may be reduced to nil.

Example 2

ABC Ltd resumed making payments to subcontractors from the month ended 5 November 2012 and continued until the month ended 5 November 2013. From then on no payments are made to subcontractors for each consecutive month until 5 October 2014 when payments to subcontractors recommenced. In this later period, as the number of consecutive nil monthly returns is for less than a 12-month period, the contractor is treated as someone who was making contract payments to subcontractors throughout. Any appeal made against CIS penalties issued during this latter period should then be worked on normal ‘Reasonable Excuse’ (CISR81020) lines.

Example 3

DEF Ltd files CIS Monthly returns with payments to subcontractors shown on them until the month ending 5 October 2011. From the return to 5 November 2011 up to and including the return for the month ending 5 February 2012, the CIS monthly returns show no payments at all being made to subcontractors. The contractor then claims a period of 6 months ‘Inactivity’ on the return to 5 February 2012, and following this, CIS monthly returns show no payments at all being made to subcontractors for the months to 5 October and November 2012. Once again, you may accept that the requirement to file a CIS monthly return actually ceased as at 5 October 2011, and any CIS penalties issued for the period ended 5 November 2011 up to and including the return ending 5 November 2012 may be reduced to nil.