Late filing and payment penalties by HMRC and Companies House

Every taxpayer’s most important responsibility is to stay on top of all compliance requirements. Whether you are working as a company, partnership, or sole trader, you need to be compliant with the laws applicable to you, otherwise, you might face late filing penalties issued by Companies House and HMRC and even prosecution.

In case yours is a dormant company you can also click here to find out your filing and submission requirements.

In this article, you`ll find the full breakdown of all the late filing penalties and late payment fines which HMRC and/or Companies House may charge in case of any sort of non-compliances.

1. Self-Assessment return

The self-assessment tax year runs from 6 April to 5 April next year. So the current tax year is from 6 April 2020 to 5 April 2021. The deadline for filing self-assessment tax return is as follows:

• For paper tax return it is midnight 31 October 2020
• For online tax return, it is midnight 31 January 2021

The income tax pertaining to it needs to be paid, latest by midnight 31 January 2021 in both the cases.

(To avoid any mistake in preparing this return, check our blog on Self-Assessment Tax Return: Top 10 tips to avoid any mistake.

The income tax pertaining to it needs to be paid, latest by midnight 31 January 2021 in both the cases.

1. Self-Assessment Late filing penalties
   

   Period of delay	Penalty
   1 day	£100 penalty
   3 months	£10 per day for up to 90 days (maximum £900)
   6 months	Further penalty 5% of the tax due or £300, whichever is greater
   12 months and later	Further penalty 5% of the tax due or £300 (whichever is greater)

   HMRC may levy additional penalties if it believes that the taxpayer has intentionally withheld information or is indulged in tax evasion.
2. Self Assessment Late payment penalties
   

   Period of delay	Penalty
   30 days	5% of tax due
   6 months	Further penalty of 5% of tax due at that date
   12 months and later	Further penalty of 5% of tax due at that date

2. Corporation tax return – CT600

The corporation tax return needs to be filed within 12 months after the end of the accounting year it covers. The corporation tax on the same needs to be paid by 9 months and 1 day after the end of the accounting year.
Delay in filing corporation tax return can result in the following penalties:

If a company’s corporation tax return is late three times in a row, the £100 penalties are increased to £500 each.

In cases where the tax return is late by 6 months, HMRC conducts ‘tax determination’ and writes to the concerned company how much Corporation Tax they think you need to pay. The company should pay the Corporation Tax due and file its tax return. HMRC will recalculate the interest and penalties they need to pay. Note that you cannot appeal against ‘tax determination’.

3. Filing of accounts with Companies House

Companies need to file their accounts to HMRC and Companies House for every accounting year. The deadline for filing the same is as
follows:

If the accounts are not filed to Companies House by the deadline then the company may attract late filing penalties as follows:

The penalty is doubled if your accounts are late 2 years in a row.

4. Confirmation Statement

The deadline for submitting Confirmation Statement is usually a year after either:

• the date your company incorporated, or
• the date you filed your last annual return or confirmation statement

The confirmation statement can be filed up to 14 days after the due date. If it is not filed on time then, you can be fined up to £5,000 and your company may be struck off.

5. Value Added Tax Return

The deadline for submitting VAT return online and paying the VAT to HMRC are usually the same - 1 calendar month and 7 days after the end of an accounting period.

1. Surcharge
   HMRC records a ‘default’ if:
   • You fail to submit VAT return by the deadline
   • Your full VAT payment submission due on your return has not reached their account by the deadline
   So if you default, you may enter a 12-month ‘surcharge period’. If you default again during this time then the surcharge period is extended for a further 12 months and an extra amount (a ‘surcharge’) on top of the VAT you owe might be payable.
   
   Surcharge is a percentage of the VAT outstanding on the due date for the accounting period that is in default. It increases every time you default again in a surcharge period.
   
   No surcharge is payable if you submit a late return, but:
   • pay your VAT in full by the deadline
   • have no tax to pay
   • are due a VAT repayment
   Amount of surcharge depends on the number of times you default in the ‘surcharge period’
   

   Defaults within 12 months	Surcharge if annual turnover is less than £150,000	Surcharge if annual turnover is £150,000 or more
   1st	NIL	NIL
   2nd	No surcharge	2% (no surcharge if this is less than £400)
   3rd	2% (no surcharge if this is less than £400)	5% (no surcharge if this is less than £400)
   4th	5% (no surcharge if this is less than £400)	10% or £30 (whichever is more)
   5th	10% or £30 (whichever is more)	15% or £30 (whichever is more)
   6 or more	15% or £30 (whichever is more)	15% or £30 (whichever is more)

2. VAT Return Penalties
   HMRC can charge a penalty of up to:
   • If you send a return that contains any inaccuracy - 100% of any tax under-stated or over-claimed
   • If HMRC sends you one that’s too low and you do not inform them that`s it’s incorrect within 30 days - 30% of an assessment
   • £400 if you submit a paper VAT Return unless HMRC has instructed you that you’re exempt from submitting your vat return online

6. Construction Industry Scheme (CIS)

If you are a contractor working under the Construction Industry Scheme (CIS), you are obligated to submit a CIS return every month stating all the payments made to all the subcontractors under the Construction Industry Scheme in the previous tax month. The return must be submitted by the 19th of every month following the last tax month. You will face penalties if you miss the date for your CIS return.

1. Filing CIS returns
   

   Period of delay	Penalty
   1 day late	£100
   2 months late	£200
   6 months late	£300 or 5% of the CIS deductions on the return, whichever is higher
   12 months late	£300 or 5% of the CIS deductions on the return, whichever is higher

   An additional penalty of up to £3,000 or 100% of the CIS deductions on the return, whichever is higher may be levied in case the return is later than 12 months.
2. Payment of deductions
   CIS deductions are paid to HMRC in the same way as PAYE and National Insurance payments. This means you must pay HMRC any deductions you’ve made during the tax month by the 22nd (or the 19th if you’re paying by post). Penalty for delayed/non-payment varies according to the number of defaults in a tax year.
   

   Number of defaults in a tax year	Penalty percentage applied to the amount that is late in the relevant tax month (ignoring the first late payment in the tax year)
   1 to 3	1%
   4 to 6	2%
   7 to 9	3%
   10 or more	4%

   Some other points:
   
   1. The first failure to pay on time does not count as a default.
   2. Late payment penalty will be charged even if you pay less than what is actually due.
   3. If you still haven`t made a monthly or quarterly payment in full after 6 months, you’ll be charged an additional penalty of 5% of the amounts unpaid.
   4. A further penalty of 5% will be charged if you’ve not paid after 12 months.
   5. These additional penalties apply even where only one payment in the tax year is late.

Conclusion

After reading the content you must have figured out by now how hefty the penalties can be in case of non-compliances. It is important to keep on the top of compliances or hire a reliable accountant so that you can offload at least the compliance burden and focus on your core business. For any further queries call our experts on 020 3960 5080 or drop them here.

By Mohit Baheti | July 16, 2020