HMRC are introducing a new fairer CIS penalty regime from October 2011 and have decided that the new and usually far lower penalties can be applied retrospectively: but only if the contractor applies. The new penalties are:
• A fixed penalty of £100 as soon as a return is late.
• A 2nd fixed penalty of £200 if the return is still outstanding 2 months after the filing date.
• If the return is still outstanding 6 months after the issue of the first penalty, a further penalty will be charged, being a minimum of 5% of the amount of the tax deductions shown on the return, or £300.
If the return is still outstanding 12 months after its due date, a 2nd more aggressive ‘tax geared’ penalty becomes due. The percentage penalty depends on the ‘seriousness’ of the ‘behaviour’ which led to the default.
• If the information on the return has been withheld deliberately and concealed, the penalty is the greater of 100% of: any deductions shown on the return or £3,000.
• If withholding information on the return has been deliberate, but not concealed, the penalty will be: the greater of 70% of any deductions shown on the return or £1,500.
• Where the information on the return has not been withheld deliberately, the penalty will be the greater of 5% of any deductions shown on the return or £300.
There is also a very useful penalty-capping provision for CIS novices. If you have not sent any previous returns and are filing your first returns late, there will be an upper limit of £3,000 on the total fixed penalties (£100 and £200). This upper limit does not apply to any “tax-geared” penalty except that, where it applies, it removes the £300 minimum penalty that would otherwise be charged where the tax-geared penalty would be less than £300.
The limit only applies in respect of contractors new to CIS that have not sent in their first returns on time. It does not apply to contractors that have already filed returns previously.
How can Lynam Tax Investigation Experts help me?
Lynam Tax partners have a vast amount of practical experience in managing tax investigations and tax enquiries. We can advise you on the best course of action and if appropriate, help you manage any necessary disclosures, in order to obtain the optimum outcome for you, your business and your family.
*For a free, private, no obligation consultation, call Paul Lynam today on 0845 643 9997
or Andrew Nutbrown on 07718 778710