A new penalty regime which applies to all contractors under the construction industry scheme who are required to submit monthly returns of payments made to sub-contractors took effect on 19 October 2011. The first return the new penalty regime will apply to is the monthly return due on 19 November 2011.
Under the new rules, the following penalties will apply:
- An automatic, fixed penalty of £100 if the return is filed late. This penalty will be applied to nil returns which are submitted late.
- An additional, fixed penalty of £200 if the return is still outstanding two months after the filing date.
- If the return is still outstanding six months after the issue of the first penalty an additional penalty of £300 or 5% of the amount of the deductions shown on the return (whichever is greater) will be charged.
- If the return is still outstanding twelve months after the issue of the first penalty a further penalty of £300 or 5% of the amount of the deductions shown on the return (whichever is greater) will be charged.
Additional penalties will be charged if, by failing to make the return on time, information is withheld which would enable HMRC to assess the amount of tax due by the contractor under the CIS. The level of this penalty will be based on the contractor's behaviour and the extent to which the withholding of information has been deliberate or concealed.
It is possible for contractors who have incurred a late filing penalty under the old penalty system prior to October 2011 to ask HMRC to apply the new rules, if the new rules would result in a lesser penalty.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.