CISR65040 - Late Return Automatic Penalties: Penalties chargeable under TMA70/S98A
| CISR Reference | Topic |
|---|---|
| CISR65600 | Action Guide contents |
From 29th October 2011, FA09/SCH55 provides for penalties to be charged where a contractor fails to submit a return or nil return by the filing date (see CISR65050 below). Prior to 29th October 2011, TMA70/S98A(2)(a) provided for penalties to be charged where a contractor failed to submit a return or nil return by the filing date.
Penalties under TMA70/S98A(2)(a) were issued automatically by CISR from 19th October 2007 up to and including 28th October 2011. After this date, no further CIS penalties under TMA70/S98A will be issued automatically.
If, however, as part of an employer compliance review, an officer of the board wishes to issue further TMA70/S98A(2)(a) penalties for CIS monthly returns with a filing date of 19th October 2011 or earlier, then the option to do so is still available although the penalty determination will need to be raised manually.
Penalties were charged up to 28th October 2011 as follows;
Late filing penalty
- Monthly return remained not filed at 19t h of the month - For the first and each subsequent month that a return had not been logged by 19t h of the month, the contractor was liable to a penalty of £100. (This applied even when the return was subsequently received between the 20t h and the 29t h of that same month).
- Monthly return remained outstanding at the late return pursuit date; 29t h of the month - The initial monthly penalty for a late return was always £100.
Final late filing penalty
- Monthly return still not received on 19t h of the thirteenth month that the return remained outstanding - there was an additional automatic final late return penalty. This penalty not exceeding £3000 was based on the number of offences within the 12 month period prior to submission of the late return.
- The amounts levied for each failure were as follows in a 12 month period;
| Number of Offence | Amount of Penalty |
|---|---|
| 1st offence | £300 |
| 2nd offence | £600 |
| 3rd offence | £900 |
| 4th offence | £1200 |
| 5th offence | £1500 |
| 6th offence | £3000 |
| 7th offence | £3000 |
| 8th offence | £3000 |
| 9th offence | £3000 |
| 10th offence | £3000 |
| 11th offence | £3000 |
| 12th offence | £3000 |
At the point at which a final late filing penalty was created the system looked back over the previous twelve monthly filing periods and identified the number of final late filing penalties created in those twelve months. This determined the amount of the next final late filing penalty. So if, for example, there had already been three final late filing penalties created, the next in the series was £1200. If there have been nine the next one was £3000.
Example 1
A scheme was issued with a £3000 final late filing penalty. There were no further instances of this type of penalty being raised against the scheme over the course of the next twelve months. The result was that the next time the system triggered a final late filing penalty for this scheme it identified that there were no instances of final late filing penalties in the last twelve months and issued a final late filing penalty of £300.
Example 2
A scheme was issued with a succession of £3000 final late filing penalties. There were no further instances of this type of penalty being raised against the scheme over the next ten months. The result was that the next time the system triggered a final late filing penalty for this scheme it identified that there had been two instances of final late filing penalties for the scheme in the last twelve months and then issued a final late filing penalty of £900 since this was the third late filing penalty in the last twelve months. No account was taken of the value of the final late filing penalty, just the number of instances.
Increase in penalty following submission of a late return up to 28th October 2011
The amount of each penalty levied for failing to submit a return by the due date was increased if it was found, after the return had been captured, to have more than 50 subcontractors entered on it. This only applied to CIS returns with a filing date of 19th October 2011 or earlier. The increase in the penalty was at a rate of £100 for each additional 50 subcontractors or part thereof. This is explained by the following example:
| Number of subcontractors on return | Amount of penalty |
|---|---|
| 10 | £100 |
| 55 | £200 |
| 110 | £300 |
| 620 | £1300 |
The number of subcontractors counted on the return was the total number of entries shown to have been paid during the month irrespective of whether they were paid under deduction or whether they were paid gross. It did not, however, include any pre-populated blank entries on the return.
Where the monthly return was submitted between 20t h and the 29t h of the month and the system detected that it contained payment details for more than 50 subcontractors, only one penalty notice was issued to the contractor which reflected the increased penalty due for that period.
For CIS penalties arising from 29th October 2011 under FA09/SCH55 the penalties chargeable will not be increased by reference to the number of subcontractors on the CIS monthly return.
Changes to penalties following corrections made to a late return up to 28th October 2011
Increase / decrease in the number of subcontractors entered
Where it became necessary to correct a return due up to 19th October 2011, and submitted after the filing date, and the correction increased the number of subcontractors entered, this could affect the amount of the penalty charge already levied. In this case, any existing CIS penalties for this return were also amended (where the correction was being made before 29th October 2011), increasing the amount of the CIS penalty charged to reflect the new number of subcontractors.
Where a return due up to 19th October 2011 but which was filed late is amended after 28th October 2011 and this increases the number of subcontractors shown on that return, an increased CIS penalty under TMA70/S98A(2)(a) is strictly due. This increased penalty will not now be issued automatically because of the introduction of CIS penalties under FA09/SCH55. If, after 28th October 2011, you wish to issue an increased CIS penalty for a return due on 19th October 2011, or earlier, then the increased penalty determination will need to be raised manually.
If the correction reduced the number of subcontractors and took it below one of the limits that affected the penalty amount, the penalty was not amended and it was up to the contractor to appeal against the amount of the penalty.
Allocating the return to a different scheme or period
A return that has already been logged or captured can subsequently be allocated to a different scheme or period. This may occur if the contractor made a mistake completing the return or, the scheme or period details quoted were unreadable. In this case, where the old scheme and period did not now have a return logged by the due date, CIS penalties due under TMA70/S98A were raised where the return was removed from the old scheme on or before 28th October 2011 for return periods up to and including the month ended 5th October 2011.
After 28th October 2011, any CIS return allocated to a different scheme or period, for return periods for the month ended 5th October 2011 or earlier, and where now no return is held for that month, will not be automatically issued with new CIS penalties under TMA70/S98A. Similarly, no CIS penalties for these months under FA09/SCH55 will be issued either, as penalties under the new legislation are only due for the months ended 5th November 2011 and later. If, after 28th October 2011, you wish to issue CIS penalties under TMA70/S98A for a month for which a CIS return has been removed from and for which no return is now held for that month you may do so, but any penalty determination will need to be raised manually.