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Is it worth appealing HMRC interest charge?

Is it worth appealing HMRC interest charge?

My company registered for CIS last summer.  It does not have any employees so did not have an existing PAYE scheme.  When registering as a CIS contractor I was told that although we would receive a PAYE employer's reference etc we did not need to submit monthly payroll returns, only monthly CIS returns.  

In the second month the CIS deductions we suffered on our income exceeded the CIS deductions we had made from our subcontractors.  I found CIS 132 (online) which explained the rules for set off in this situation, so submitted our monthly CIS return relating to our subcontractor deductions but did not make any payment.  We did this for the next 4 months before getting a call from HMRC chasing payment of 5 months worth of CIS deductions. 

They told me that we should have been submitting monthly EPS returns.  I was mortified as I really had tried to do everything by the book.  None of the CIS guidance I read referred to monthly payroll returns and right at the beginning the CIS helpline also told me we didn't need to do them as we didn't have any employees.  I even had to ring HMRC to get the set up of our PAYE scheme amended so that I could register for PAYE online & submit the required returns.  

Our account remains in credit as in each month we have suffered more deductions from our income than we have made from our payments BUT HMRC have charged interest on the 5 "late" payments.  They told me on the phone that "100% - any appeal against the interest would be unsuccessful so it would be a waste of time".  My question is - is it worth appealing or would it be a waste of time?


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By jcace
19th Feb 2016 16:49

Go for it

I would write to them and explain the situation, pointing out that in fact you were in credit for each month concerned and you should therefore not be charged any interest. Also explain that you were told by HMRC that you would not need to submit payroll returns etc etc.

Set out the position for each month. Have you submitted EPSs for each month or just one up-to-date?

Thanks (1)
19th Feb 2016 16:58


Submit EPS showing the total of CIS tax suffered and appeal.

As there was no loss of revenue and PAYE usually do not issue penaties for 1st offence - then you should be fine getting the penalties cancelled.

Thanks (1)
19th Feb 2016 17:24

Just asking .....

Is this interest or a 2% penalty for five late payments ?

I would be optimistic about cancelling these penalties/interest but it'd be useful to know what you've been charged and why.

Thanks (1)
By MrsG
19th Feb 2016 17:58

Further details...

This month I submitted EPSs for each of the "missing" months but have been told that they only look at the last one, so the cumulative amount was initially allocated to this month.  The credit has now been manually allocated against each of the 5 months with the balance (credit) remaining in this month.  Apparently this remaining credit will not automatically be offset against any future liabilities - I will have to ring & request a manual allocation if this is needed.  To be fair to HMRC, they did ring to advise me that this re-allocation was required - if they hadn't done this then presumably interest would still be accruing.

The man I spoke to described the amounts as interest, but couldn't tell me the rate.  I have a monthly breakdown but have not yet had chance to try & re-create their calculation of the amounts.  I will post this once I've worked it out.

He said that the interest has arisen because in each of the months we have submitted CIS returns showing an amount payable by us without advising them via an EPS in the same month that there was CIS suffered to offset, so although nothing was actually ever due, they didn't know this.  (Although they do know that we have suffered CIS deductions as the contractor we worked for has submitted returns showing the deductions they made from payments to us.  Or is it just a bit too much to expect HMRC to be that joined up?)     

There has been no mention of penalties....yet....maybe these are still to come...

Thank you all for your comments - it seem like its worth a go to appeal.  I will let you know the outcome. 

Thanks (0)
20th Feb 2016 09:35


Stick at it.....

1. Appeal 

2. Review by a senior officer

3. Alternative dispute resolution

Thanks (1)
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