CIS fixed penalties ruled disproportionate | AccountingWEB

CIS fixed penalties ruled disproportionate

Penalties of nearly £20,000 for a builder who filed 18 late tax returns are “harsh and unfair”, a tax tribunal has ruled in a setback for the Construction Industry Scheme (CIS) aimed at reducing tax evasion.

The first-tier tribunal (Anthony Bosher v HM Revenue and Customs, TC02307), ruled that although Bosher had no reasonable excuse for repeatedly filing monthly returns to HMRC giving details of all payments to sub-contractors under the Construction Industry Scheme, the taxman’s fixed penalties of about £19,000 on tax deductible from the returns of about £6,000 were “not merely harsh but are plainly unfair”. 

Anthony Bosher, who has been registered with the CIS since 2007, said that he made all of his returns on time and did not receive any penalty notices until 22 June 2010. He claimed that HMRC’s penalties were “unjust".


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carnmores's picture

good to see

carnmores | | Permalink

the fines for CIS even under the new regime are still totally disproportionate

Exam Question

Roland195 | | Permalink

A client is a joiner working exclusively for domestic customers. During a particularly busy period in Apr-11, as a one off he engages another joiner to help out for a couple of days. The other joiner invoices him for £200 which he pay and thinks no more of it until...

On 29th January 2013 client comes in to get his books drawn up for the preparation of his tax return for the year ended 5th April 2012. You then notice his failure to register for CIS tax and deduct from the contractor.

What do you do?

A. Insist that the client registers and backdates the return. The fine of over £3,000 on around £40 of tax will learn him to pay more attention next time. (Do not accept the argument "how would I know a scheme entitled The Construction Industry would apply to me? I've not been on a building site in my life?")

B. Ignore it and make sure he knows to do it properly next time.   






Perhaps ensure that the other | | Permalink

Perhaps ensure that the other tradesman bills the customer directly?

carnmores's picture

frankly thats ridiculous

carnmores | | Permalink

:o) home made questions. Youre not setting gcses here

Paula Sparrow's picture

However....    1 thanks

Paula Sparrow | | Permalink

The second tier tribunal has just overturned the first tier tribunal decision in Hok on the late filing of P35s on the basis that the penalty could only be overturned by Judicial Review.  It is probably now a case of watch this space on penalties

JAADAMS's picture

Advice from HMRC - you might be interested..

JAADAMS | | Permalink

A new client of mine (CIS subby himself for years) took on a 'one off' large contract needing three helpers over a period of 3 months. Did not register to be a CIS contractor. I picked this up when I came to prepare his accounts a year later. Registered him immediately.

HMRC queried return (the total amount was large in comparison with previous years) and have issued an Enquiry asking why he did not register, for names, addresses and description of work, workers UTR and CIS numbers.

When I rang HMRC to discuss what they wanted and most importantly, what would be the max fine, they advised to answer letter and then a penalty notice would be issued. When it arrives they advised to appeal using the grounds that client had never been a CIS contractor before and did not know he had to register, stress that he has been a good boy since then and submitted ontime. Apparently they always advise to appeal against a penalty notice.

HMRC will check the returns of those workers to see whether they have declared payment received and been taxed thereon - there will be no come back such as asking my client for the CIS money. Just the worry of a penalty then.

They also advised the penalty would be a maximum of £3,000 because he was a new contractor.

I have told client to try to put £3,000 of his previous years CIS refund away - just in case we cant get the penalty quashed.





Tom 7000's picture

Exam Question

Tom 7000 | | Permalink

The answer to the exam question is.....


Imagine you are standing in front of the President of the instiitute who will strike you off as an accountant if you get this wrong and you will never work again


Also there is HMRC who will prosecute you for money laundering and confiscate ALL you own


And a high court judge who will give you 6 months for getting it wrong


Also there is your the love of your life  who will leave you for the milkman as you were in jail


Now does anyone think B......


The Black Knight | | Permalink


Be better to cut out the middleman, deal yourself and run of with the milkman and share his women! LOL


Disproportionate penalties.

The Black Knight | | Permalink

If the penalty is with CIS and PAYE does this make it a criminal sanction as there is an element of punishment in the penalty...and therefore if the punishment is criminal then the right to legal representation and a fair trial apply?

I wonder if these arguments will lead towards a HRA issue?


johnjenkins's picture

After the HOK

johnjenkins | | Permalink

decision HMRC will undoubtedly go for 2nd tier in this case. Let's hope this guy has enough money to go to high court.

By the way are milkmen still around, can't remember the last time I saw one. OK where did the phrase "run off with the milkman" come from?


Giles76 | | Permalink

My view is that anyone even remotely connected to the construction industry should incorporate to minimise the risk of these penalties.