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Construction Industry Scheme - Penalties kick in this month

October 2007

When the new CIS scheme was implemented in April 2007, HMRC agreed to waive the penalties for late returns for the first 6 months. This penalty free period, April 2007 to September 2007, is now over!

Automatic Penalties for late returns - form CIS300.

These will now be applied to all late returns received by HMRC after 19 October 2007. Please note the definitions that follow:

1. All late returns means just that - if you have any unsubmitted monthly returns for the period 6 April to 5 October 2007 and they are received by HMRC after 19 October 2007, penalties will be levied on all the returns. (If you file returns electronically you get an extra 3 days so will need to file by 22 October 2007.)

2. A return needs to be made even if it is a Nil return - penalties will still be applied if filed late.

3. The penalty charged will be £100 for each month that the return is outstanding. This amount will be increased by £100 for each additional 50 sub-contractors who should have been entered on the return. For example the return for the month ending 5 May 2007 was due to be filed by 19 May 2007 - if this is subsequently filed after 19 October 2007 an automatic fine of £100 will be levied. If the return for the month ending 5 June 2007 is also filed after 19 October 2007 this will incur a separate penalty of £100.

4. In future these monthly returns must be received by HMRC by the 19th of the following month. The return for the month ending 5 November 2007 must be filed by 19 November 2007 and so on. The emphasis here is the word "received". It will not be sufficient to claim that the return was sent by the 19th of the month.

To summarise, if contractors fail to submit ANY of the monthly returns issued by HMRC for the period 6 April 2007 to 5 October 2007, by 19 October 2007 (22nd October if you file electronically), penalty notices will be issued, automatically!

Three further points that may be of assistance:

  • You can file a Nil return by ringing the CIS help line 0845 366 7899, option 4.
  • If you are not making regular payments to subcontractors for a period you can ask the Revenue to record you as "inactive", this will suspend issue of monthly returns for up to 6 months.
  • HMRC have reported that a significant number of returns have had to be sent back as contractors had omitted to sign them! If a return is sent back to you for this or any other reason it will not be registered as received until it is corrected and re-submitted.

Please call now if you are experiencing difficulties in completing the returns, you have approximately 14 days from the day you receive this newsletter to file any outstanding returns - we can help.

Hilton Sharp & Clarke