Perhaps one of the most notable changes with the inception of the post 2007 rules was the introduction of the CIS penalties regime. Many contractors are often caught unaware by the significant penalties they can be facing for failures under the scheme.
The current penalties regime under schedule 55 FA 2009, which came into effect as of October 2011 provides:
- Failure to submit monthly return by 19th month = £100
- Monthly return is still outstanding after 2 months = additional £200
- Monthly return outstanding after 3 months = additional £300 or 5% of the CIS deductions from the return (whichever is higher)
- Monthly return outstanding after 6 months = additional £300 or 5% of the CIS deductions from the return (whichever is higher)
- Monthly return outstanding after 12 months = additional £300 or 5% of the CIS deductions on form the return (whichever is higher)
These penalties also apply to NIL returns.
Additional penalties can be levied on the following basis:
- For information deliberately withheld from HMRC = up to 100% of the CIS deductions
- For information negligently withheld from HMRC = up to 70% of the CIS deductions
In addition to the above penalties HMRC can levy up to £3,000 per monthly return submitted if you incorrectly tick the self-employed status declaration when your subcontractors should have been declared as employed.
The final CIS specific penalties which can be imposed are:
- Failure to provide CIS records to HMRC for inspection = up to £300, plus £60 per day outstanding
- Making a false statement in order to obtain gross payment status = up to £3000