Penalties For Late Filing Of Corporation Tax

What is Corporation Tax?

Corporation Tax is the tax companies are required to pay on their profits. The amount of tax to be paid, is calculated after they submit their accounts and depends on the amount of profit made. It is the directors’ responsibility to ensure all financial documents and accounts are accurate, so the appropriate amount of tax is charged.

Within 9 months of the financial year end, a CT600 file needs to be sent to companies’ house. Failure to do this, can have consequences. If you are aware you cannot pay your tax bill call us today for expert advice on 07833 240 747 or 0800 9700539.

What about if I pay late? What happens?

Paying corporation tax late does not have penalties. What does have penalties, is filing your accounts late. Even if you cannot afford to pay the tax, accounts must be filed on time. If you cannot pay the complete amount in the time, then you can contact HMRC and arrangements can be made. For example, funding can be analysed or HMRC may agree to a Time to Pay deal.

If you do not file your accounts by the required date, which is 9 months after the accounting period ends, the following penalties occur :

• 1 day late – £100 penalty
• 3 months late – An additional £100 penalty
• 6 months late – 10% of the unpaid tax amount (as estimated by HMRC)
• 12 months late – A further 10% of any unpaid tax.

For late payments, you will only be charged interest at the rate of 2.5% on top of the Bank Of England Base Rate, on the outstanding amounts due. However, if you are a company who pays your tax in monthly instalments rather than the bulk at once, and you deliberately pay the incorrect amount of your instalment, or pay it late, you may have penalties. See the website below to find out your penalties if this applies to you.

https://www.gov.uk/guidance/corporation-tax-paying-in-instalments/penalties-on-instalment-payments

It should be known that If you fail to keep an adequate record in relation to the accounting periods, you risk being liable for a £3000 penalty fee.

Can I go to court?

No. You cannot go to court for late payments or late filing. All that HMRC want, is the tax to be paid. You will be issued letters demanding the payment. Your credit rating will not be affected. In the worst case scenario, HMRC have the authority to wind up your company, or seize your assets. It is very rare that the directors themselves will be personally liable.

Contact us today for any further enquires. We are experienced in dealing with HMRC so can help you.

What if I can’t pay the Corporation Tax at all?

If a company can’t pay its debts, it’s likely insolvent, but insolvency doesn’t always mean the end.

Time to Pay Arrangement

The company can negotiate to spread payments over time. Directors may get 6-12 months with HMRC, but insolvency practitioners can often secure 2 years or more with professionally prepared forecasts and statements for creditors.

Company Voluntary Arrangement (CVA)

A CVA is a formal, legally binding deal allowing an insolvent company to repay a portion of unsecured debts over 3-5 years. It requires 75% creditor approval. Though more complex than a time to pay arrangement, directors remain in control, and it can help the company survive.

Administration or Liquidation

These are terminal insolvency events, where the company ceases trading and assets are sold to repay creditors. Liquidation is preferable when the company has no future, protecting directors from wrongful trading accusations. Any Corporation Tax is written off.