Wednesday, November 5, 2008

CIS tax fines hit £180m

Contractors have been hit with ВЈ180m in fines under the new Construction Industry Scheme (CIS).

The huge total is more than double the worse-case scenario predicted by tax experts following the introduction of the scheme.

Fed up with the new CIS? Tell us your story on the CJ blog.

Industry commentators are now worried that a welter of fines will send contractors under as the recession bites.

CIS tax expert Carolyn Walsh said: "This hard line on CIS fines is threatening firms' futures. The figures are huge and contractors cannot afford it at the moment.

"The government is talking about helping companies through the bad times - but its tax officials are doing just the opposite."

The new CIS system came into force in April last year. HM Revenue & Customs gave companies six months to get their houses in order and only started issuing fines for late tax returns in October 2007. Companies are fined ВЈ100 for each late return.


CIS tax fines hit £180m


Despite the high level of fines, HMRC also revealed it has upheld a high proportion of appeals. Latest figures obtained by CJ showed that 227,000 companies had lodged an appeal by mid-September. Of those, 185,000 were successful and had their fine remitted.

Walsh said: "The level of appeals shows the hard line HMRC is taking in the first instance. Their automatic reaction is to fine over the slightest breach of the rules."

Exchequer Secretary to the Treasury Angela Eagle also confirmed in Parliament last week that around 10,000 construction firms have lost their gross payment status for persistently filing late returns since new CIS was introduced.

It is the first time that either the government or HMRC have publicly quoted a figure. Contractors are being urged to lobby HMRC in a bid to retain their gross payment status.

Liz Bridge, secretary to the Joint Taxation Committee for Construction, said the number of firms losing their gross payment status was "clearly very worrying".

She said: "Historically construction companies become elective mutes when they can't pay their bills.

"If you are going to be late on any payment they will treat you better if you start a dialogue."

An HMRC spokesman said: "We can't always predict how compliant people are going to be. We can only give an estimate on our assumptions. The fact is that more penalties have gone out than we anticipated."

New CIS in numbersTotal fines: ВЈ180mNumber of fines: 1.7 millionAppeals lodged: 227,000Successful appeals: 185,000

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