A section 62B penalty is a financial penalty imposed on a person who makes a CIS return treating certain sums as paid, while knowing, or having reason to know, that a connected party has deliberately failed to comply with Construction Industry Scheme obligations. The penalty is set at 20% of the sums the return treats as paid and the liability falls on the return-maker.
FA 2004 section 62B was inserted by Finance Act 2026 (Royal Assent 18 March 2026) and came into force on 6 April 2026. It is the companion provision to section 62A: s.62A targets the payment act; s.62B targets the return act. In a typical CIS arrangement, the same contractor will both make the payment (s.62A exposure) and file the monthly CIS300 reporting those payments (s.62B exposure), so both penalties can arise from the same transaction if the “knew or should have known” standard is met.
The key elements of a section 62B charge:
- Trigger: making a CIS300 return that includes sums treated as paid, while knowing (or having reason to know) of deliberate CIS non-compliance by a connected party.
- Rate: 20% of the sums the return treats as paid (not a percentage of any tax HMRC considers lost).
- Who is liable: the return-maker (the contractor who filed the CIS300). This may be a company or an individual.
- Standard: “knew or should have known”: identical to the s.62A standard; constructive knowledge through failure to carry out due diligence is sufficient.
Because s.62B attaches to the return rather than each individual payment, the penalty base is the total sums reported as paid on the return. A contractor who includes £150,000 of payments on a monthly CIS300 while meeting the knowledge standard faces a potential s.62B charge of £30,000 for that single return.
For the full context of both ss.62A and 62B within the April 2026 reforms, see CIS April 2026 rule changes explained. The due-diligence framework that prevents these charges is at CIS supply chain compliance and due diligence.