CIS late registration, penalties, PI claim

CIS late registration, penalties, PI claim

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On 29/10/12 I asked how much penalty would be imposed on a contractor who failed to register in 2011/12

What I can glean from answers frightens me, and I haven't yet had a straight answer that I can understand

Surely someone has had this situation before, and can quantify how much my client is going to be stung for.

As my client entrusted his previous adviser to register him, can my client sue him on his PII to recover any penalty that he may suffer?

Replies (5)

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Euan's picture
By Euan MacLennan
08th Nov 2012 14:48

Read the legislation

The penalties that apply to late CIS returns from October 2011 are set out, surprisingly clearly, in FA 2009, Sch.55, paras. 7 to 13.  The one of interest to you is para.13(2)(b) under which the penalties are capped at £3,000.  (Item 6 in the table in para.1 is CIS returns and the penalties under paras. 8 & 9 are the £100 for any late return & £200 for one more than 2 months late).

Of course, your client can sue his previous adviser if he wishes.  If he succeeds in his claim, the adviser's PII policy (if he has one) may well cover it.

Nothing will be gained by delaying CIS registration any longer.

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By Democratus
08th Nov 2012 14:56

HMRC site

Try here

Extract below

 

Penalties for missing the return deadlineLength of delayPenalty 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.

Limit on fixed penalties for contractors new to CIS

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

Thanks (1)
avatar
By antony norris
10th Nov 2012 07:49

late registration, further questions

Many thanks to the 2 who replied.

Further questions

1. the total £3000 cap - does it apply to all returns including any outstanding before 19/10/11?

Or are these very old returns charged additionally under the old rules?

2. As my client is due to make his first return on registration by 19/11/12 is he classified as a new contractor for the purpose of this exercise

3. Will HMRC allow as reasonable excuse the fact that the old accountant failed to comply with frequent and reasonable requests to get my client registered.

4. At this point I will have to do a paper return. Will I be able to photocopy the paper return, and then make returns for each of the previous returns outstanding?

Observation

Not surprisingly the old accountant has not replied to my courtesy letter. I had to get the 2011 return details from HMRC

The 2011 return revealed an entry of an amount under OTHER ALLOWABLE BUSINESS COSTS, exactly equal to the gross sub contractor payments in that year.

At this stage I am not sure whether

1 he paid his sub contractor net

2 why the subcontractor has NOT made a fuss about 2011 but has made a fuss about 2012

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Jennifer Adams
By Jennifer Adams
11th Nov 2012 14:49

Suggest you read my response...to previous Any Answers 29.10.12
Someone else has indeed come across your problem - I am going through exactly the same situation with a client.Have a look at the Any Answers question dated 26.10.12 - CIS fixed penalties ruled disproportionate 

I wrote a long response headed 'Advice from HMRC - you might be interested'.

In my comment I included a suggestion/ recommendation direct from HMRC re penalties for late submission of CIS returns. If client has never submitted returns before then HMRC said that £3000 was the max penalty. If the returns apply pre Oct 2011 the £3000 cap still applies as the law changed as from that date. Get the client registered asap. Suggest you do as my comment suggests when the penalty notice arrives. I sent my appeal/reply letter to HMRC on Friday - I included a comment saying that immediately we realised he should have registered he did so and has been a good boy every since (I've done the returns - thats why!). I also did the 'he's very sorry - never been a main contractor before - didnt know how to register etc etc.' plead.I'll let you know their response.

 

 

Thanks (1)
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By antony norris
11th Nov 2012 16:13

reply to JAADAMS

That's great. I'm waiting also for information from clients sub contractor as to exactly what happened in 2010/2011, but at least I can go back there if I need to with no extra penalty cost.

I've also asked the client to go through itemised phone bills to his old accountant as possible evidence for HMRC (penalties) or his old accountant's PII provider (claim for penalty costs)

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