The Tax Tribunal recently heard the case of Heronslea v HMRC which arose from a Construction Industry Scheme return due on 19 June 2010.   

HMRC stated that it did not arrive until 22 June and therefore determined a late filing penalty of £100.

The company appealed the penalty informing HMRC the return was posted in good time to arrive on our before 19 June.  The taxpayer stated that they posted the return first class on 14 June 2010, however they did not obtain proof of posting. 

The Tribunal found that obtaining proof of posting was not a legislative requirement for the CIS return and that therefore “properly addressing, pre-paying and posting a letter containing the document….at the time at which the letter would be delivered in the ordinary course of post”, was acceptable unless HMRC could prove otherwise.

The tribunal heard that first class post normally arrives on the day after posting or the day after that, and therefore a letter posted first class on 14 June could be expected to arrive by 16 June – three days before the deadline.

Despite the outcome of the case, it would appear to be prudent to obtain proof of posting where possible given HMRC’s apparent aggressive stance.  Perhaps a posting book or recorded delivery, especially if a deadline is looming.

Penalties for late Construction Industry Scheme (CIS) contractor monthly returns are due to change from October 2011 onwards.

The new penalty regime could produce lower penalties than those under the current rules. A key change will be for new CIS contractors who will now have an upper limit to some of the penalties that are charged.

The upper limit will apply when new contractors first send a monthly return, where that return and any other late monthly returns that are submitted at the same time.

The new penalties do not start until October 2011, however, any contractor who is liable to penalties for filing a late monthly return prior to October 2011 is entitled to request that HMRC calculate the level of penalties under the new rules.  If this is less than the amount already charged, HMRC should agree to reduce the penalties to the lesser amount.

Eaves and Co Specialist Tax Advisors in Leeds are experienced in the construction industry scheme penalties and enquiries can assist in corresponding with HMRC to ensure the best position for our clients.

The Construction Industry Scheme remains a difficult beast with which to comply.

Here at Eaves & Co in Leeds we are dealing with a case where tax was not deducted by a contractor on a certain category of payment to its subcontractors.

The case has been ongoing for a good of time and we have been introduced to mitigate the CIS tax exposure to the contractor.  Our well considered case that the contractor took “reasonable care” in implementing the CIS has been put to HMRC.  We await to hear whilst still claiming evidence that the subcontractors have actually paid all relevant taxes, which is the second line of defence.

Reasonable excuse is a well tested path in CIS terminology with a number of recent cases taken to Tribunal in attempt to avoid the consequences of non-CIS compliance.  We expect our case of reasonable care to be thoroughly tested by HMRC.