Construction industry scheme penalties
Construction industry scheme penalties

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Construction industry scheme penalties
  • CIS returns and payment of tax
  • Late filing penalties for CIS returns
  • Penalties for months from 5 November 2011 onwards
  • Penalties for months up to and including 5 October 2011
  • Penalties for late payment of tax withheld under CIS
  • Penalties for inaccurate returns
  • Penalties for false statements
  • Appealing against penalties

This Practice Note explains that penalties may be payable for:

  1. failing to:

    1. submit construction industry scheme (CIS) returns on time, or

    2. pay the tax withheld under the CIS rules to HMRC on time, or

  2. submitting inaccurate CIS returns and/or failing to notify HMRC of an under-assessment to tax

The CIS was devised to limit the amount of tax lost as a result of sub-contractors in the construction industry under-declaring or failing to notify their chargeability to UK tax.

The scheme operates to withhold tax at source at the point of making a 'contract payment' (ie a payment made by a contractor under a construction contract), thereby reducing the risk of a subsequent default by the sub-contractor. However, if the sub-contractor can prove it has complied with its tax obligations it can apply to receive payments gross.

For:

  1. an overview of how the scheme works, see: Construction industry scheme—overview

  2. the meaning of the key concepts of 'contractor', 'sub-contractor' and 'construction operations', see Practice Note: The construction industry scheme—when does it apply?

  3. an outline of the compliance obligations, including the due date for the payment of tax withheld under the CIS rules, see Practice Notes:

    1. Construction industry scheme—contractors' obligations

    2. Construction industry scheme—sub-contractors' obligations, and

  4. practical points to consider when gross payment status is lost, see Practice Note: Loss of CIS gross payment status—practical considerations for sub-contractors

CIS returns and payment

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