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HMRC clarifies Construction Industry Scheme penalties

Contractors working in the construction sector may be interested to learn that HMRC last week confirmed details of its new penalty regime for construction tax returns that are either late or missing.

The new scheme comes into force on October 6th which means returns for the period ending November 5th will fall under the new regime.

Limited company contractors who file late, or fail to file a return under the Construction Industry Scheme, will be liable to a maximum fine of £3,000.

As soon as a return becomes late, a £100 fixed penalty will be applied. If the return has still not been filed after two months, a further fixed penalty of £200 will be incurred.

A tax-geared penalty will be applied to any returns that still remain unfiled six months after the first penalty was issued and a similar penalty will be imposed if the return is still outstanding after one year. HMRC will also charge interest on late payment of penalties.

The tax-geared penalty after six months will be either £300 or 5% of deductions detailed on the return; whichever is the greater. The second tax-geared penalty depends on whether the Revenue deems that information was deliberately withheld.

If it believes information was deliberately concealed the fine will be the greater of £3,000 or 100% of deductions. In cases where information was deliberately withheld but not concealed, the penalty will be the greater of £1,500 or 70%, and if information was not withheld, the fine will be the greater of £300 or 5%.

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