From 1 November 2011, the position will change. The new rules will apply for any returns due to be filed after 1 November 2011. The new penalty regime will be as follows:
1. An initial penalty of £100 is charged if the 19th of the month deadline is not met;
2. A further penalty of £200 is charged if the return is still outstanding more than two months after the due date;
3. A tax-geared penalty becomes due if the return is still outstanding six months after the due date. This penalty is the greater of:
• 5% of any deductions shown on the outstanding return, or
• £300
4. A second ‘tax geared’ penalty becomes due if the return is still outstanding more than twelve months after the due date, as follows:
If HMRC determines that withholding information on the return has been deliberate and concealed, the penalty is the greater of 100% of any deductions shown on the return or £3,000.
If HMRC determines that withholding information on the return has been deliberate but not concealed, the penalty will be the greater of 70% of any deductions shown on the return or £1,500.
In all other cases, where HMRC determines that information on the return has not been withheld deliberately, the penalty will be the greater of 5% of any deductions shown on the return or £300.
The new penalty provisions are contained within Schedule 55 of the Finance Act 2009.
Continuing the above example, let us roll the clock forward two years, beyond the transitional year, and look at what the position would be if Mr Partridge (assuming all other factors are the same) made no CIS returns for 2011/12, looking again just at the fixed penalties:
The fixed penalty position would be as follows:
Return month: Penalty £:
5 Apr 2013 £100 100
5 Mar 2013 £100 100
5 May 2012– Feb 2013 (£100 + £200) x 10 3,000
Total Fixed Penalties due as at 1 May 2012 £3,200