CIS Penalties A new Construction Industry Scheme (CIS) commenced on 6 April 2007. Annual returns are no longer required; instead contractors must complete a monthly return. In order to allow contractors time to ‘familiarise themselves with the new scheme’ HM Revenue & Customs (HMRC) initially did not charge penalties for any late returns. However, from 19 October 2007 contractors will be charged a penalty for any CIS returns that are not received by HMRC by the due date. This includes returns due from the start of the new scheme between May and September. Monthly returns must be submitted to HMRC within 14 days of the end of the tax month to which they relate, even if there are ongoing discussions about the content or figures on the return. Contractors who have not paid any subcontractors in a particular month must still submit a ‘nil return’. Returns can be made by post, electronically using EDI or appropriate third-party software, over the telephone or via the Internet (www.hmrc.gov.uk/new-cis). Any return not received from contractors by the due date is liable to a fixed penalty of £100 for a return of up to 50 subcontractors. This penalty is increased by a further £100 for each additional 50 subcontractors or part thereof that should have been included on the return. The penalty is repeated for every month or part thereof that the return is outstanding. For example, tax month 7 return due by 19 November but submitted on 29 December, with 65 subcontractors, would incur a £400 penalty. Penalties up to £3,000 may be imposed where the contractor makes an incomplete or incorrect return and HMRC considers that the error or omission has been caused by negligence or intent on the part of the contractor. For additional guidance on completing the monthly return visit http://www.hmrc.gov.uk/new-cis/contractor-monthly-return.htm. Paul Tew, Pay Magazine Snowdrop provides a range of Payroll solutions that are fast, flexible and easy-to-use, to suit the many and varied needs of each organisation. To find out more about the software and services that we provide, please click here >>