Construction Industry Scheme Penalties

HM Revenue & Customs have issued information detailing changes to the Construction Industry Scheme (CIS).

Penalties for late filing or non-filing of contractor monthly returns are changing after October 2011.

The first return affected by the changes to late-filing penalties is the return for the month ending 5 November 2011.

The following penalties will apply to that return and to all subsequent months’ returns that are not filed, or are filed late, for as long as the return is outstanding.

■ Immediately the return is late – a fixed penalty of £100
■ Two months after the filing date – a second, fixed penalty of £200
■ Six months after the filing date – a tax-geared penalty which is the greater of £300 or 5% of the amount of deductions shown on the return.
■ Twelve months after the filing date – a second tax-geared penalty which is the greater of £300 or 5% of the amount of deductions shown on the return. If it is believed that information has been deliberately withheld, greater penalties may apply.

A limit will apply to the fixed penalties for new contractors so that the £100 and the £200 penalties do not exceed a maximum of £3,000. During this period, no tax-geared penalty will be issued. However, once returns are received penalties will be adjusted to include 5% of the amount of deductions shown, if appropriate.

Interest will be charged on any penalty paid late.

When the new penalties begin, no more automatic penalties will be issued for outstanding returns up to and including the one for the month ending 5 October 2011. Those penalties already charged are still due for payment unless successfully appealed against and payment of these should be made immediately. HMRC will continue to raise amendments to penalties already issued, where necessary and further penalties can be issued manually for earlier returns, if appropriate.

For further information click here

To avoid penalties remember to:

■ File your return in good time (to reach HMRC by 19th of the month).
■ Tell us immediately if you stop trading or do not pay subcontractors in a particular period.