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If you're a contractor under the Construction Industry Scheme (CIS) you'll need to send HM Revenue & Customs (HMRC) a return each month. Your monthly returns tell them about any payments you've made to your subcontractors during the last tax month.
HMRC will expect you to send your returns in to them on time every month to help them run the scheme efficiently. It's important to beat the deadline to avoid getting an automatic penalty.
This guide explains what will happen if you send a return in late.
You'll also find this information helpful if you're an agent who handles CIS returns for your clients.
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HMRC expect you to get each monthly return to them no later than 14 days after the end of the tax month it's for. A tax month runs from the sixth day of one month to the fifth day of the following month. So in practice, it means you'll need to get your returns to HMRC by the 19th of each calendar month.
For example, if your return was for the tax month from 6 May to 5 June, you'd need to get it to HMRC no later than 14 days after 5 June. So the deadline for that return would be 19 June.
Even if you didn't pay any subcontractors during the last tax month, you'll normally still need to make a 'nil return' to tell HMRC. The same deadline applies to nil returns.
If you make your returns by post, be sure to send them in good time to allow for any postal delays. Always make sure you sign the return. If you don't, HMRC will send it back for you to sign. But they can't give you any extra time to return it to them.
Submitting your returns electronically can help you to beat the deadline. You can make your return 24 hours a day, seven days a week. In most cases, it should get to HMRC almost instantly, however, in busy periods such as around the 19th of the month there might be a delay. Exceptionally, in a small number of cases, it could take up to 24 hours for your return to be acknowledged. If this happens, please don't keep trying to resend the return as this can cause multiple returns for the same period.
There are several different ways of making your monthly returns electronically, including HMRC's CIS Online service. It's free to use, but you'll need to register before you can use it.
However you make your returns, you should always get them to HMRC on time. So even if there's something on a return that you're still discussing with them, send it in anyway.
If you send HMRC a monthly return late - whatever the reason - you'll automatically get a penalty.
|Length of delay||Penalty you will have to pay|
1 day late
A fixed penalty of £100. This applies even if your return has no subcontractors on it - a nil return.
2 months late
A fixed penalty of £200. This applies even if your return has no subcontractors on it - a nil return.
6 months late
£300 or 5% of the CIS deductions shown on the return, whichever is the higher. This is as well as the penalties above.
|12 months late||
£300 or 5% of the CIS deductions shown on the return, whichever is the higher.
In serious cases you may be asked to pay up to £3,000 or 100% of the CIS deductions shown on the return, whichever is the higher.
These are as well as the penalties above.
If you are a new contractor, and have never filed any contractor monthly returns before, and you fail to send in your returns you will be sent fixed penalties of £100 for each return that HMRC does not receive on time. And you will owe a further £200 for each return that you don't send to HMRC by two months after its due date. If you fail to send in several monthly returns, these penalties will start to mount up but will not be higher in total than £3,000.
Once HMRC has received at least one return from you, they will no longer treat you as a new contractor and the limit on fixed penalties will no longer apply to you.
While HMRC treat you as a new contractor, you will also owe tax-geared penalties of 5 per cent of any deductions shown on your returns. These penalties do not have an upper or lower limit. HMRC will charge you any tax-geared penalties when you send in your outstanding returns.
A contractor, that is not new to CIS, does not send in their returns due on 19 January 2012 and 19 February 2012. They send the returns in October which HMRC receive on 14 October 2012. The returns for January and February show totals for subcontractor deductions of £5,000 and £8,000.
When the contractor misses the due date of 19 January, they will be sent a penalty of £100. When HMRC does not receive the return two months later, by 19 March, they will send the contractor a further penalty of £200. As HMRC have still not received the return by 19 July, six months later, they will send out a further penalty of £300. This makes a total of £600 for the January return.
HMRC will also send a £100 penalty when the contractor misses the deadline for the February return and a further £200 when they don't get that return by 19 April. The contractor will also get a penalty of £300 when the return is not received by 19 August, making a total of £600 for this return.
When HMRC receive the contractor's returns in October 2012 they will check if they need to increase any of the tax-geared penalties. As 5 per cent of the £5,000 subcontractor deductions on the January return is £250, HMRC don't adjust the £300 penalty that the contractor was sent shortly after 19 July. But, 5 per cent of the £8,000 subcontractor deductions shown on the February return is £400. As HMRC sent the contractor a penalty of £300 shortly after 19 August they will now send a further penalty for £100.
A contractor new to the construction industry starts to pay subcontractors in late December 2011. On 31 December 2012 the contractor tells HMRC that they have been paying subcontractors for each of the last 12 tax months and gives HMRC the returns for the twelve months outstanding. Each return shows a total of subcontractor deductions of £4,000.
The contractor owes penalties of £100 for each late return.
They also owe £200 for each return that hadn't been received by
HMRC two months after its due date.
The contractor has sent in twelve late returns, ten of which were over two months late. So their fixed penalties, which would have been £3,200 (£1,200 + £2,000) are limited to a total of £3,000.
When HMRC receive all the returns on 31 December they will calculate the tax-geared penalty this contractor owes on the returns that are over six or twelve months late. For new contractors, the tax-geared penalty is neither limited in total nor subject to a minimum amount each month.
The contractor sent in their returns due for January to June all over six months late. Each shows a total of subcontractor deductions of £4,000 and so the contractor incurs a 5 per cent tax-geared penalty of £200 for each one. This contractor will owe HMRC £4,200 in penalties. This is made up of £3,000 (the limit for fixed penalties) and £1,200 (six tax-geared penalties of £200).
If HMRC charge you a penalty they will give you a penalty notice. You've got the right to appeal against any penalty notice. This must be done in writing to:
HM Revenue & Customs
CIS Penalty Appeal
Carnbane Industrial Estate
You'll find more information about how to appeal against a late return penalty on the penalty notice they sent you.
Mistakes do happen and it may be that HMRC agree with the reason why you're appealing. If they do, they will drop the penalty.
Sometimes HMRC may change a penalty amount because you've amended a late return.
For example, you might have sent them a late return and had a tax-geared penalty for being over six or twelve months late. If you later realised you'd included two subcontractors by mistake you'd need to tell HMRC about the error so they could update your return. Because the two subcontractors were paid under deduction, you may be entitled to have your tax-geared penalty re-calculated if correcting your return reduces the amount of tax-geared penalty. This will only apply where you have paid a tax-geared penalty for that return of more than £300, or if HMRC treated you as a contractor that was new to CIS. In these circumstances, you should write to HMRC and ask them to reduce the tax-geared penalty.
This does work both ways. If you owed a tax-geared penalty on your original return but later add further subcontractors paid under deduction, HMRC may have to increase your penalty.
If you've got any questions about a penalty notice, or you want advice on managing your returns, you can call HMRC's CIS Helpline.
You may have to pay a penalty under the 'old rules' that applied for returns due on or before 19 October 2011.