CJS Eastern v HMRC [2015] UKFTT 579 concerned late filing penalties in the Contruction Industry Scheme. The FTT explored its powers to reduce both fixed and month 13 penalties.

The Company failed to file returns under CIS for the years 2008/09, 2009/10 and 2010/11.

HMRC assessed CIS late filing penalties as follows:
1. fixed penalties, each of £100, charged under Taxes Management Act 1970 s 98A(2)(a) for failures to submit CIS returns totalling £28,500.

2. Discretionary penalties for each of three years, charged under TMA s 98A(2)(b), in relation to the CIS failures which had lasted for more than twelve months. These are known as “Month 13 penalties” and totalled £52,500.

HMRC had offered to use their statutory discretion to reduce (“mitigate”) the penalties, by following the rules under the new CIS penalty regime set out in Finance Act 2009, Schedule 55 (“Sch 55”). After HMRC’s recalculation using the Sch 55 rules, the total penalty reduced to £20,700.

The company refused to accept this mitigated amount, and appealed the original penalties to the FTT on the grounds of reasonable excuse and proportionality. The mitigated penalty was not under appeal before the Tribunal, which has no jurisdiction over the extent to which HMRC mitigates penalties

it claimed 'reasonable excuse' for late filing on the basis that it misunderstood the rules. It thought that under a staffing arrangement it had delegated responsibility for CIS to an agency. 

The tribunal did not agree and found that the company should have sought professional advice.

The FTT decided that:

  • Following the Upper Tribunal's decision in HMRC v Bosher [2013] UKUT 579 TCC it has no power to reduced fixed penalties unless they are wrongly calculated or charged.
  • A month 13 penalty is capable of reduction (TMA 1970 section 100(2)(b)). It found that it was excessive: it amounted to 50% of the company’s annual profits in its best year.


A useful judgment for anyone with an appeal relating to penalties issued under the pre Finance 2008 regime. Penalties for late returns filed from October 2011 onwards fall within Schedule 55 FA 2008, for full details see CIS penalties, old and new regimes.

Link to case:

CJS Eastern v HMRC [2015] UKFTT 579