Finance Act 2009 and Finance Act (No. 3) 2010 contain a number of provisions to align the penalty regime for late filing and late payment across most taxes. These measures are being introduced gradually, as and when HMRC resources allow.
The first change seen was the introduction of new late payment penalties for PAYE and National Insurance for the 2010/11 tax year and onwards. HMRC will be issuing the first notifications of these penalties after 5 April 2011 and so we will soon be able to assess how this new penalty regime is operating in practice.
The next stage is likely to be centred around self-assessment and the construction industry scheme (CIS) with planned implementation as follows:
- 2010/11 self-assessment returns – It is expected that the new late filing penalties will apply to the 2010/11 returns, with the first due filing deadline (for paper returns) being 31 October 2011.
- 2010/11 self-assessment payments - It is expected that the new late payment penalties will first apply to 2010/11 balancing payments i.e. from 31 January 2012.
- CIS returns – It is expected that the new late filing penalties will first apply to returns for the month to 5 November 2011. See below for a planning tip
These new penalties will be discussed in more detail, including a comparison with the existing regimes, in a monthly lunchtime tax update webinar being held by SWAT UK: “Managing Tax Risk: Monthly Tax Update” – 16 February 2011. Call 0800 2800 433 for details.
Cashback for CIS clients?!
In a lot of cases (e.g. on a return showing less than 50 subcontractors filed just a couple of days late) the “new” penalty would be identical to the late filing penalty currently being charged.
There will however be several cases where the new penalty regime will lead to lower penalties than are being charged at the moment. As such, it is crucial to note that any contractor who has been, or is, charged penalties for late filing of a monthly return for a period ending on or before 5 October 2011, may ask HMRC to:
- Work out how much the penalties would be under the new rules;
and, if less than the amount already charged, - Agree that their penalties should be reduced to the lesser amount.
HMRC have given examples of cases where the penalties might be lower or higher under the new rules (Schedule 55 of Finance Act 2009).
This is a situation worthy of consideration for all clients required to file CIS returns.
Where a refund might be due, the contractor (or their agent) should contact the HMRC office with whom they last had contact about any penalties that have been charged. Any appeal against penalties charged should be submitted as soon as possible to the address shown on the penalty documentation. This address is:
HM Revenue and Customs
CIS Centre
Carnbane Way
NEWRY
BT35 6QG
HMRC request that any correspondence is marked 'Section 102 Claim'.
Try a FREE Demo of the Tax Risk Management Manual from SWATUK
The Tax Risk Management Manual is a comprehensive guide to the most common risks and errors seen in the preparation of client tax returns. It explains the risks and sets out the various ways in which different firms could choose to manage these risks. The manual gives you guidance on the penalty regime for incorrect returns, guidance on HMRC's Agent Toolkits, common mistakes seen by HMRC and SWAT UK (and how to avoid them) and much more.
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