Appealing a CIS penalty - what counts as a reasonable excuse

If you receive a penalty for late CIS returns or late payment of CIS deductions, you can appeal if you have a reasonable excuse.

When you can appeal a CIS penalty

You can appeal a CIS penalty if:

• you had a reasonable excuse for filing or paying late
• you believe the penalty has been calculated wrongly
• you believe you should not have received the penalty, for example because you filed on time but HMRC did not receive it

A reasonable excuse is something unexpected or outside your control that stopped you from meeting your CIS obligations on time. HMRC considers each case individually, but there are clear patterns of what they accept and reject.

Understanding CIS penalties

Before appealing, understand what penalty you have received and how it was calculated. CIS penalties escalate the longer you delay, so a quick appeal is important.

What HMRC accepts as a reasonable excuse

HMRC publishes guidance on what typically constitutes a reasonable excuse. The key principle is that the excuse must be genuine and unexpected, and must directly cause the failure.

Examples of accepted and rejected appeals

These examples show how HMRC applies the reasonable excuse test.

Appeals HMRC accepted

• A contractor had a heart attack 5 days before the return was due and was in hospital for 10 days. With medical evidence, the appeal was upheld because serious illness was unexpected and directly prevented compliance.
• A fire at the business premises destroyed computers and paper records 3 days before the deadline. With the fire service report and insurance claim, the appeal was upheld because the records could not be recreated in time.
• A contractor tried to file on the 19th but got error messages, and had screenshots of attempts between 6pm and 11pm. HMRC's service status confirmed an outage, so the appeal was upheld.
• A contractor's spouse died unexpectedly 8 days before the return was due. With the death certificate and a statement, the appeal was upheld because a recent bereavement is a recognised reasonable excuse.

Appeals HMRC rejected

• The contractor's accountant promised to file but forgot. Responsibility stays with the contractor, so relying on someone else is not a reasonable excuse.
• A large project left the contractor no time to file. Pressure of work is not unexpected, and the deadlines are known in advance.
• A new contractor did not know about the filing requirements. Not knowing your obligations is not a reasonable excuse.
• The contractor's computer failed and there were no backups. Routine IT problems are foreseeable, so businesses should keep backups.
• The contractor could not afford to pay an accountant to file. Financial difficulty does not excuse late filing, though it may be considered for late payment penalties in limited circumstances.
• The person responsible for CIS returns resigned without notice. Staff turnover is foreseeable, so businesses should have contingency plans.

The appeal process

Appeals must follow a specific process with strict deadlines. Missing deadlines can make your appeal invalid.

Step-by-step: how to appeal

Writing an effective appeal

Your appeal letter should be clear, factual, and supported by evidence. Here is a structure that works:

What to include

1. your full name, business name, UTR and CIS contractor reference
2. the reference number from your penalty notice
3. a brief, factual description of what prevented you complying
4. why you could not have foreseen or prevented it
5. when you filed the return or paid the deductions after the excuse ended
6. a list of the evidence you are attaching

Example appeal letter opening

"I am writing to appeal the late filing penalty of [amount] dated [date], reference [penalty reference], relating to the CIS return for tax month [period].

On [date], I was admitted to hospital following a heart attack. I was unable to work or access my business records until [date]. As soon as I was discharged and able to work, I filed the return on [date]. I attach a letter from my GP confirming the dates of my illness and hospital admission."

What happens after you appeal

If HMRC accepts your appeal

The penalty is cancelled. If you have already paid it, HMRC will refund the amount to your CIS account or bank account.

If HMRC rejects your appeal

You can ask for an internal review by a different HMRC officer. This is free and sometimes succeeds where the first appeal failed. You can also appeal to the First-tier Tax Tribunal within 30 days of HMRC's final decision.

Tribunal appeals

The First-tier Tax Tribunal is independent of HMRC. You can represent yourself or use a tax adviser. For small penalties, the tribunal uses a paper-based process - you do not need to attend a hearing.

There is no fee to appeal to the First-tier Tribunal (Tax Chamber), whatever the size of the penalty or the category your case is allocated to.

Multiple penalties and appeals

If you have received penalties for multiple late returns, you must appeal each penalty separately. However, if the same reasonable excuse applies to all penalties (for example, a period of illness), you can include them all in one letter.

State clearly which penalty references you are appealing and confirm that the same excuse applies to each one.