The new system will cap fines at £3,000 for new contractors who are late with their returns rather than the current regime where monthly £100 fines for each late return can stack up continuously.

Accountants have successfully appealed against huge fines under the current system which have seen contractors rack-up bills of £80,000.

One expert told the Enquirer: “The existing system can be a bit of a joke with fine upon fine mounting-up to ludicrous levels creating a mountain of paperwork.”

The new regime will see a fixed penalty of £100 issued once a return is late.

Two months after the due date a late filing will incur a £200 fine then £300 after six months or 5% of the deductions if that amount is greater.

Another £300 will be levied after 12 months with the total capped at £3,000 for contractors new to the system.

HM Revenue & Customs is planning to write to contractors in September with full details of the new system.

A spokeswoman said: “People in the construction industry must be aware that HMRC will apply greater penalties where information has been deliberately withheld.”