Penalties – company accounts and Corporation Tax
Accountants often talk about penalties and interest being incurred if documents are filed late, but we find that people rarely know the actual facts and figures that can be involved. This is quite a large subject, so in this blog we’re concentrating purely on a general overview in regard to company accounts and CT returns.
You should also note that sometimes filing deadlines vary if a set of accounts is shorter or longer than a year, so check your specific deadlines with your contractor accountant. This is a general outline only…..
If your company accounts are filed late, Companies House will issue a penalty notice as soon as they are finally filed. The penalties they will impose are as follows:
- Under one month late – £150
- More than one month but less than three months – £375
- More than three months but less than six months – £750
- More than six months – £1,500
These penalties will double if the accounts are late for a second year, so they can quickly become quite considerable.
HMRC – Corporation Tax return
A CT return covers a period up to a year, and is due 12 months after the period end – note that this is different to the accounts deadline for Companies House above, which is nine months after the year end. Your accountant will usually just quote the earlier date as the deadline so that the accounts and CT return can be filed at the same time.
There is an automatic penalty of £100 for late filing, regardless of whether tax is due, and then an additional daily penalty of £10 may be charged if it is more than 3 months late. On top of these standard amounts, a tax geared penalty may be charged if the return is more than 6 months late, based upon the higher of £300 or 5% of the tax due.
Things step up a gear if the return is 12 months late, and penalties are then based upon your behaviour. The penalty will be the higher of £300 and:
- 5% of the tax due if the withholding of information was not deliberate
- 70% of the tax due if the withholding was deliberate but not concealed
- 100% of the tax due if the withholding were deliberate and concealed (you tried to hide it)
The penalties that apply for late filing of a CT return also apply across other taxes, so these are the same for your personal tax return.
HMRC – CT liability
CT is due 9 months and 1 day after the end of the accounting period. If you fail to pay the tax due on time then interest will be charged from the due date, along with a penalty of 5% of the unpaid tax. An additional 5% penalty will be charged if the tax is unpaid 3 and 9 months after the filing date.
If you fail to file a CT return HMRC may make a determination, which is simply an estimate of what they think you owe. This can be superseded by the real return, but until then HMRC will continue to chase the debt as if it was the genuine one.
A company must keep all the records that support a return – receipts, invoices, statements etc – for 6 years following the end of the period in question. You can keep these as PDF copies though, so there’s no need to keep boxes and boxes of paperwork. The only things you need to keep originals of are dividend vouchers and anything else containing a tax credit.
In addition to penalties being incurred for non-filing of documents or for late payment of tax, having a bad record will also highlight you to HMRC as potentially high risk – if you cannot file on time, what’s the likelihood that you’re following the letter of the law in other areas? So, if you’re continually filing late don’t be surprised if you also end up with an HMRC Inspector coming to visit!
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.