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Contractors are being offered the opportunity to reduce their tax administration costs by taking advantage of the revamped HMRC penalty regime, almost a year before its official introduction.
The Revenue has announced it will consider applying the forthcoming method for calculating fines for late filing under the construction industry scheme (CIS), if a tax contractor believes a fine under the present set-up is excessive.
The new system is set to come into effect on October 2011, under schedule 55 of Finance Act 2009. The taxman expects it to lead to fewer and smaller charges for overdue submission of the monthly contractor return.
Businesses that will be affected can now ask for their fines to be recalculated under the overhauled CIS rules, and then choose to pay the lower amount. If the recomputed figure is accepted, the taxpayer cannot appeal against it. If the recalculation is rejected, the taxpayer can dispute the original fine in the usual manner – as laid out in the Taxes Management Act 1970, s 98A.
The minimum penalty for each late monthly return will remain at £100, and the figure may still exceed liabilities shown on the contractor return. However, a retallied fine could be lower if the taxpayer:
- was charged more than one penalty in respect of a single monthly return;
- was charged more than £100 in respect of any one monthly return; or
- is new contractor who has been charged penalties for more than one late monthly return.
