Companies House and HM Revenue and Customs filing and payment penalties

Companies House and HM Revenue and Customs filing and payment penalties

31st July saw the following deadlines for individuals and limited companies:

  • Second payment on account for individuals for the 2017/18 tax year
  • Companies House filing deadline for companies with a 31 October 2017 year-end
  • Corporation tax payment due for companies with a 31 October 2017 year-end
  • Corporation tax return filing deadline for companies with a 31 July 2017 year-end

If deadlines set by Companies House or HM Revenue and Customs are missed, companies and individuals face immediate fines or penalties which can escalate over time.  In this weeks blog, we look at these fines and penalties

Companies House – private limited company

Private limited company accounts need to be submitted to Companies House within 9 months of the company’s year-end.  If the company does not file accounts by the deadline, it will be subject to the following penalties:

Time after your deadline

Penalty

1 day

£150

3 months

£375

3 to 6 months

£750

More than 6 months

£1,500

If your accounts were late the previous year then these fines will automatically be doubled so it’s important you file your accounts by the due date.

Different penalties apply to public limited companies.

HM Revenue and Customs

Corporation Tax Return (form CT600)

A company needs to submit a corporation tax return (form CT600) together with supporting accounts and tax computations within 12 months of the company’s year-end.  The accounts need to be in a specific format to be accepted by HMRC software.  If the company does not file the corporation tax return by the deadline, it will be subject to the following penalties:

Time after your deadline

Penalty

1 day

£100

3 Months

Another £100

6 Months

HMRC will estimate your Corporation Tax bill and add a penalty of 10% the unpaid tax

12 months

Another 10% of any unpaid tax

 If your tax return is late 3 times in a row, the £100 penalties are increased to £500 each.

HM Revenue and Customs will write to a company if a tax return form is 6 months late.  This is called a ‘tax determination’ and cannot be appealed against.  A company must pay the corporation tax due and file the tax return.  HM Revenue and Customs will then recalculate the interest and penalties due.

VAT

For any VAT registered business, HM Revenue and Customs may issue surcharges and penalties.  These surcharges and penalties work on a default basis.  HM Revenue and Customs will record a default if:

  • a VAT return is not received within the specified deadline
  • the full balance of the VAT due on the VAT return has not reached their account by the deadline

A VAT return is due one month and 7 days after the end of the VAT period, so for a quarter-end of 31 July, the VAT return will be due on 7 September.

Payment is typically due at the same time as the VAT return is due, however, VAT registered businesses who opt to pay their VAT by direct debit have a further 3 days, so for a quarter-end of 31 July, the VAT would be collected by direct debit on 10 September.   

Surcharges

If a VAT registered business defaults, they would enter a 12 month surcharge period.  During this time, if the business defaults again, the following would happen:

  • the surcharge period is extended for a further 12 months
  • you may have to pay an extra amount (a ‘surcharge’) on top of the VAT you owe.

If a VAT registered business submits a late VAT return, they would not have to pay a surcharge if:

  • VAT is paid in full by the deadline
  • there is no VAT to pay
  • there is a VAT repayment due

If the business does default, HM Revenue and Customs will write to the business explaining any surcharges owed and what would happen should the business default again.

The surcharge is a percentage of the VAT outstanding on the due date for the accounting period that is in default. The surcharge rate increases every time the business defaults again in a surcharge period.

This table details how much the surcharge will be should a business default within 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

None

None

2nd

None

2% (None if less than £400)

3rd

2% (None if less than £400)

5% (None if less than £400)

4th

5% (None if less than £400)

10% or £30 (whichever is greater)

5th

10% or £30 (whichever is greater)

15% or £30 (whichever is greater)

6th or more

15% or £30 (whichever is greater)

15% or £30 (whichever is greater)

 It is important to note that no surcharge is payable on the first default.

Penalties

HM Revenue and Customs can charge the following penalties:

  • Up to 100% of any tax under-stated or over-claimed if a return that contains a careless or deliberate inaccuracy
  • Up to 30% of an  assessment if HM Revenue and Customs sends an assessment which is too low and the business fails to advise them that is is incorrect within 30 days
  • £400 if a business submits a paper VAT Return, unless HM Revenue and Customs has advised the business that they are exempt from submitting returns online.

Construction Industry Scheme (CIS)

If a contactor working under the CIS scheme misses the deadline for submitting a CIS return, they will face the following penalties:

Time after your deadline

Penalty

1 day

£100 penalty

2 months

£200 penalty

6 months late

£300 penalty or 5% of CIS deductions (whichever is greater)

12 months late

£300 penalty or 5% of CIS deductions (whichever is greater)

A CIS return must be submitted within 2 weeks of the month-end.  So for a month end of 5 July, the CIS return must be submitted by 19 July.

Self-Assessment

For individuals, there are two types of penalties, those for late filing and those for the late payment of owed tax.  Both of these penalties increase over time.

As most individuals are aware, a Self-Assessment tax return must be submitted to HM Revenue and Customs by 31 January each year.  If this deadline is not met, the following penalties will apply:

Time after 31 January deadline

Penalty

1 day

£100 penalty

3 months

£10 daily penalty for up to 90 days (maximum £900)

6 months

5% of tax due or £300 (whichever is greater)

12 months and later

5% of tax due or £300 (whichever is greater)

HM Revenue and Customs by apply additional penalties if they believe that the tax payer is intentionally withholding information or trying to evade tax.  It is therefore imperative to provide HM Revenue and Customs all information they require when they undertake any checks.

Payment of tax is due on 31 January and 31 July each year.  A payment is only due on 31 July if an individual is obliged to make payments under payments on account.  If the deadline for payment is not met, the following penalties will apply:

Lateness

Penalty

30 days

5% of tax due

6 months

5% of tax due at that date

12 months and later

5% of tax due at that date

Clearly, it is imperative that filing deadlines are met and tax payments are paid at the appropriate times to ensure that penalties are not incurred.   

If you have any queries or require any advice, please contact us on 0161 952 4244.