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:
These penalties also apply to NIL returns, although from 6 April 2015 a penalty in respect of any months for which a NIL return is due will not usually be charged by HMRC.
Additional penalties can be levied for returns outstanding after 12 months as follows:
Where an incorrect monthly return has been submitted, the penalty regime that applies for returns submitted from 19 April 2009 falls under Schedule 24 FA 2007. The level of penalty is based on the ‘behaviour’ that led to the error being made.
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: