A Comprehensive Guide to Navigating CIS Penalties

false registration

Here we have the information about the CIS penalties that will be imposed to get registered for payment under deduction or gross payment status within the Construction Industry Scheme (CIS) if either of the following is done:

  • Supplied false information
  • Provided false documents

Registration Conditions

Subcontractors must provide business and identity details if they’re registering with CIS for:

  • Payment under deduction
  • Gross payment status

They must also confirm their turnover from work involving construction operations in the preceding 12 months. Turnover means income. However, it does not include the direct costs incurred for the materials provided.

HMRC may request proof to validate the information provided during registration and may cancel your registration if you have done or influenced another person to have done any of the following:

  • Supplied information knowing it to be false
  • Provided any false documents.
  • Do not respond to requests for documentary evidence to support your application.

This cancellation will take effect immediately, with a penalty for false registration.

Penalties for False Registration

Below are the CIS penalties you are likely to incur if you committed false registration under the CIS scheme with HMRC:

£3,000 

This penalty applies if the information provided concerning the identity, business or turnover of the company is submitted:

  1. Recklessly
  2. While knowing it to be false and still doing either of the following:
  • Give HMRC further incorrect information or documents
  • Do not respond to HMRC’s requests or supply the additional information the tax authorities require.

£2,000

Contractors must pay £2,000 if either of the following applies:

  1. You are unable to provide satisfactory documents.
  2. You confirm that your original registration provided false information or documents about either of the following:
  • Your identity and business
  • Your business and turnover

£1,000 

Contractors must pay the amount stated above if the false information or documents are about any of the following:

  1. Your or another person’s identity
  2. The business
  3. The turnover

For more information, click here.

Other Applicable Penalties Under the CIS Scheme

False registration is not the only offence that carries significant penalties under the CIS scheme. HMRC may order you to pay a substantial amount, depending on the violation/s you have committed.

Late Filing

CIS returns, including the CIS payment and deduction statement, must be submitted on or before the 19th of every month. If a contractor fails to submit the necessary documents on time, the following penalties will apply:

  • £100 – 1 day late
  • £200 – 2 months late
  • £300 or 5% of the CIS deductions (whichever is higher) – 6 months late
  • £300 or 5% of the CIS deductions (whichever is higher) – 12 months late
  • An additional £3,000 or 100% of the CIS deductions (whichever is higher) – more than 12 months late

These penalties are cumulative and applicable for every monthly CIS return a contractor fails to file and submit on time.

Incorrect Employment Status

When filing CIS returns every month, contractors must verify the employment status of their subcontractors. If the HMRC finds your company providing inaccurate information about your subcontractors’ or workers’ employment status, it can slap you with fines of up to £3,000.

Poor Record Keeping

As a contractor, you must keep records showing the payments you made to subcontractors and any CIS tax deductions you have claimed. HMRC can ask your business to provide access to your CIS records anytime. Failure to heed the tax agency’s request could potentially result in a penalty of up to £3,000.

Good thing there is a simple yet effective way to keep and manage your CIS records. Investing in CIS payroll software such as Primo Umbrella can help ensure the accuracy and integrity of your CIS payroll. It also comes with a host of features designed to streamline the payroll process, ensuring that you pay the correct salaries and taxes at the right time.

Always File Your CIS Returns Correctly

Because HMRC can charge significant penalties, contractors like you must ensure that your CIS returns are always in order. You must provide the most accurate information about your business and subcontractors while ensuring that your company is appropriately registered under the CIS scheme. Failure to do so can result in hefty fines that can hurt your cash flow.

Because managing CIS payroll is essential to your business, it certainly helps to have Primo Umbrella to avoid penalties from HMRC. Contact us today to send us your enquiries or request a free demo.

 

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