Late Return Automatic Penalties: Individual or Partnership contractor has ceased to trade, or the contractor now has employees only and has outstanding monthly returns
Where you are notified that an Individual or Partnership contractor has ceased to trade, or any type of contractor now has employees only, and there are outstanding monthly returns, you will need to take the following actions on CIS. Note; where a company contractor has ceased to trade, you should instead follow the action guide at CISR65690.
Mr A Contractor has written a letter dated 4t h April 2010 stating that he has ceased trading or now has employees only. However, he has not provided you with the date that the last subcontractor was paid. You are looking at the contractor’s letter on 16t h April 2010, and the last CIS Monthly return that has been submitted is for the month ended 5t h February 2010.
The actions you need to take are as follows;
- note EBS of the cessation of the contractor using the date of notification (in this example 4th April 2010)
- set penalty inhibitions against all penalty dates for the current month you are working the letter (in this example to 5t h May 2010)
- set a Return exemption for the current month you are working the letter (in this example to 5t h May 2010)
You will now need to consider the earlier months. At present, we do not know when the last payment was made to a subcontractor and whether the monthly returns for the months to 5t h March and 5t h April 2010 are due;
- set penalty inhibitions for the next penalty date when CIS penalties are due to be issued for each month where the CIS monthly return is still outstanding (in this example, to 5t h March and 5t h April 2010)
- make one attempt to telephone the contractor to ask for the date that they last paid a subcontractor. If there is no response;
- write to the contractor asking them to submit the outstanding monthly returns (in this example to 5t h March and 5t h April 2010), or if they are not due to be completed ask the contractor to provide you with the date that they last paid a subcontractor
- BF for a response to your letter.
No Response to your letter
- at the end of the BF period remove the penalty inhibitions set at 4. above
- take no further action
Date of last payment to a subcontractor obtained
If the contractor is contacted by telephone or responds to your letter and says (for example) that the date they last paid a subcontractor was 28t h February 2010, then the following actions would now need to be taken
- set penalty inhibitions for all remaining instances for the monthly returns that you no longer require (in this example to 5t h April 2010)
- set return exemptions (see also note below) for each of the monthly returns that you no longer require (in this example to 5t h April 2010)
- remove the penalty inhibitions set at 4. above for any returns that are still required
- change the cessation date entered on EBS to the date that a subcontractor was last paid. Note: it is not necessary to re-open the scheme on EBS to do this.
If the contractor has not ceased but now has employees only, do not alter the date of the change from a ‘PSC’ to a ‘P’ type scheme on EBS made at 1 above but make a note in Employer Notes in EBS of the date the last subcontractor was paid.
- make sure that you obtain completed monthly returns from the contractor for the months where subcontractors were paid and the monthly returns are still due.
Note; where the contractor scheme is closed on EBS and the cessation date falls into a previous tax year, you will not be able set return exemptions for the tax year(s) following the year of cessation. Instead, in these limited circumstances only you may capture a nil return for each month from the 6th April following the year of cessation to the month the scheme was actually closed on EBS. When doing so please make the following note using ‘Record Contact’;
- ‘‘Pro forma nil returns captured MM/YY to MM/YY inclusive following a request by DMB as contractor ceased DD/MM/YY - PID1234567’