How to successfully appeal a CIS penalty fine (construction industry scheme)

by Mike on January 23, 2009

_150372_tax_man_cartoon_300This month I’ve noticed a substantial increase in the number of people who are hitting our website searching for ways to avoid or otherwise appeal their automatic penalty notices received under the new Construction Industry Scheme. HMRC started charging penalties in October 2007 although our logs this month have recently shown a vast increase in the number of contractors who are searching Google for a way to appeal their penalties.

So what’s going on then?

The sample size is statistically relevant, which implies that more contractors are likely to be receiving penalty notices in January than in any of the previous months (and it looks from the search activity that there could be more fines sent out in January than in any of the previous months combined!!). The top half dozen keywords and a graph of all CIS fine related keyword activity:

  • success in filing an appeal for late penalty on corporation tax
  • appeal cis penalty
  • appeal cis fine
  • how to appeal a cis penalty notice
  • how to avoid a cis fine
  • CIS300 fines
  • and other variants of the above

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Have you received an automatic penalty/fine notice?

If you have been fined, we would like to help you.

If you can provide us with proof of your automatic penalty (via fax or email), we will send you a coupon for 50% off the cost of an annual CIS Solver subscription (a saving of £194.50). None of our customers have ever been fined, and they can rely on our support to assist them (in addition to the HMRC helpdesk) if they have any queries about their monthly returns. This is well worth the investment to ensure that you don’t receive any more fines for incorrect or late filing. The offer expires on the 5th of April 2009, so be quick!

Want to know how to appeal the penalty you’ve got? Read on.

How do you get a penalty? How much are they for?

As a contractor, HM Revenue & Customs expect you to make your CIS300 monthly return no later than 14 days after the end of the tax month for which it is due. Tax months run from 6th to the 5th of the following month and therefore you must aim to make your return by the 19th of each month. If you didn’t pay any subcontractors you must still make a “nil” return.

If you send returns by post, there is a good chance that with postal delays and manual error that the return will not be registered as received by HMRC in good time and you will be fined. If you make the return electronically using HMRC’s own online product, it can be prone to prolonged system outages and is not capable of loading data from your own spreadsheets or accounting systems. We have developed our system to address this need of secure, easy to use and reliable online filing with a guaranteed receipt that can be saved or printed off in order to protect you from any possible penalties.

Table of penalties

Number of subcontractors on the return Automatic penalty for a late return (including ‘nil’ returns) Additional penalty for each extra month late (continues up to 12 months) Extra final penalty where a return is over 12 months late
0-50 £100 £100 £3,000
51-100 £200 £200 £3,000
101-150 £300 £300 £3,000
151-200 £400 £400 £3,000
500 £1,000 £1,000 £1,000
… and so on

It is possible to have a penalty downgraded (using the table above) such that if you accidentally included too many subcontractors in your return and this takes you into another penalty charge band, HMRC may allow you to remove those subcontractors such that you return to a lower penalty charge band. In other words, if you had 52 subcontractors on your return and two of those were added by mistake (so you were wrong AND late), then you may be able to get away with a fine of £100 per month instead of £200, by confessing your mistake!

Receiving an automatic penalty notices is also likely to affect your gross payment status, so it is best to avoid getting one in the first place.

If you don’t agree with the penalties

You have a right to appeal and details of how and where to appeal will be included with the penalty notice. The penalty criteria is straightforward and we know of contractors who have contacted us after having delays in processing manual forms (contact HMRC instead please!) who have not had a successful appeal on the basis of obtaining recorded delivery or proof of postage. Also if your return has a mistake in it and HMRC send it back to you may go “overdue”. The only way to ensure delivery is online and you either use an agent, HMRC’s package or one like ours.

Gateway Solver (CIS, PAYE, CT, VAT): www.gatewaysolver.com
CIS Solver (CIS): www.cissolver.com

A few screenshots of our online filing software

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Our software will show you a receipt that looks like the above. Whatever software you choose to file with, it is important that you make a note of the receipt as shown above which constitutes proof of acceptance by HM Revenue & Customs.

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Our Gateway Solver software holds the modules for CIS, PAYE (and soon VAT and CT).

optionssettings
The Options & Settings dialog

wouldyouliketocontinuewaiting
Easy to understand dialogs

sendmonthlyreturn
Easy to fill-in forms, and can load data from third parties such as Easybuild ERP, Sage Line 50 or Microsoft Excel

verfications
The CIS Solver module comes with a complimentary unlimited-usage subcontractor tax treatment verification system

p35returnsuccess
Gateway Solver’s complimentary P35 filing for EasyBuild ERP customers. All further PAYE forms to follow shortly.

{ 4 comments… read them below or add one }

Scott Kane January 25, 2009 at 10:04 am

Timely and great post, Mike. Really nice to see a software company looking out for their customers interests. Keep it up!!

Reply

mike January 25, 2009 at 6:48 pm

Thanks Scott,

I’m now starting to get some hits for appealing US customs fines now :)

It is important that Micro ISVs can do what they can. We small independant software vendors are in a good position to be able to “Evolve” to the current market conditions, and to make good products that people what to buy. It’s not all doom and gloom, hopefully :)

Reply

alan cursons February 12, 2010 at 7:35 pm

mother died of cancer did not do 14 monthly returns have fines £42,000 have obviously returned all now can only see bankruptsy as option i am soletrader

Reply

mikelwilson October 4, 2011 at 11:15 pm

Hi Alan,

The best thing to do in a case like that is to get in touch with an accountant or solicitor who can contact HM Revenue & Customs on your behalf to ask if they can come to some form of arrangement for the payment.

Alternatively, contact citizens advice quickly!

All the best,

Mike

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