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One fifth of the industry is still not getting their tax returns in on time eight months after the Inland Revenue introduced the CIS scheme.

Latest figures from HMRC show that 143,000 firms sent back their returns by last month’s 19 December deadline.

The Revenue reckons that 176,500 should have sent back their monthly returns. Under the new rules, firms that miss the deadline will be fined a minimum £100, meaning that last month’s fines will swell Revenue coffers by at least £3.3 million.

In November, 130,000 contractors, or 76 per cent of those required to do so, sent in their returns on time leading to fines of at least £4.1 million.

A HMRC spokeswoman said: “The figure is improving overall, as penalties start to bite and we shall shortly start pursuing those who have not paid to find out why.”

But tax experts said the Revenue does not have enough staff to enforce the penalties and are turning a blind eye to the issue.

Alasdair Kendrick, a partner with tax advisor Bourne Business Consulting, said: “At the moment it’s a voluntary compliance because the Revenue is not going around kicking contractors because it doesn’t have the resources. Getting repeated fines is supposed to jeopardise a firm’s status to receive payment gross as a contractor.”

On its introduction, HMRC said firms would not be fined for late returns in the first six months of the scheme. But this moratorium ran out after 19 October, meaning that November was the first time the Revenue could start issuing fines.

The smallest fine is meted out to firms who use between one and 49 subcontractors, while contractors with 50 or more will be hit with a fine of £200 for every late return filed, climbing to £300 for those with 110 or more. And those with 620 or more will be fined £1,300.

The industry has consistently failed to hit the 19th of every month target since the new rules came into force on 6 April last year. In the first five months of the scheme up to September last year, over 150,000 returns had still not been sent back to tax offices.

The tax month runs from the 6th of every month to the 5th of the following month – giving firms two weeks to send their forms back.

Some industry bodies have said the postal system is too unreliable for smaller companies to have total trust in the Royal Mail.

“With Ontime Contracts we eliminate the risk of your company being fined or prosecuted by HMRC as the responsibility is ours”

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