CIS: penalty refund offer: if you suffered excessive late filing penalties under the Construction Industry scheme (CIS) prior to October 2011 you may be eligible for a refund, subject to normal time limits.

  • This offer applies to anyone who has suffered CIS late filing penalties since April 2007 (subject to the next bullet point).
  • The upper penalty cap in Sch 55 FA 2009 only applies to those who have not filed CIS returns previously.
  • Anyone can apply to have the penalties re-calculated under this arrangement, but it is not worthwhile for £100 penalties.

A new CIS penalty regime (Sch 55 FA 2009) replaces the old (s98A TMA 1970) regime in October 2011. The main difference between the two regimes is that the new one places an upper limit on penalties.

HMRC introduced late filing transitional measures on 17 November 2010. 

HMRC has accepted that late filing penalties levied under the s98A TMA 1970 rules may be unfair compared to those charged were the new regime introduced by Sch 55 FA 2009 to apply to them now. It will allow any contractor charged penalties under s98A to request that they are recalculated under the Sch 55 regime.

This transitional measure is permitted by s102 of TMA 1970; this gives the Board of HMRC the authority to mitigate, stay proceedings in respect of, or remit, any penalty.

Qualifying conditions:

  • The contractor must have incurred penalties since April 2007.
  • In recalculating penalties, the upper cap in Sch 55 only applies to contractors "new" to CIS. This means contractors who have not previously filed returns under CIS.
  • For contractors who have been filing returns previously the upper cap will not apply.
  • It appears that anyone who has been penalised since April 2007 should request a recalculation.

In order to request a recalculation of penalties incurred (at any time up to October 2011) a claim must be made in writing to HMRC.

There is no mechanism for appeal against a decision of HMRC to reduce a penalty under the arrangement. Taxpayers are told by HMRC to use its complaints procedure or apply for Judical Review (an expensive option as legal representation is required).

Worked examples: CIS old and new regime and transitional measures.

 

 

 

 

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