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Paying corporation tax late

If you’re having trouble paying your corporation tax, it helps to know what your obligations are, as well as the potential interest and penalties for late payment of corporation tax. Find out everything you need to know about corporation tax late payment, right here.

What is corporation tax?

Corporation tax is a type of business tax based on your business’s annual profits, in much the same way as income tax is calculated for individual taxpayers. You won’t receive a bill for corporation tax, which means that you’ll need to register for the tax when you start doing business, keep accounting records, and prepare a company tax return to calculate exactly how much corporation tax you need to pay. Currently, the corporation tax rate is set at 19%.

When is the deadline for paying corporation tax?

Usually, you need to pay your corporation tax nine months and one day after the end of your accounting period. In most cases, your accounting period is the same 12 months as the financial year that’s covered by your company’s accounting records. For example, if your accounting period ends on March 31 (as it does for most companies), you’ll need to pay your corporation tax on January 1.

It’s imperative that you start preparing to pay your corporation tax as soon as you reach the end of your accounting period. If you begin preparations too late, you could end up with an unexpectedly large tax bill that you’re unable to pay, leading to interest and penalties for late payment of corporation tax. Using digital accounts to manage your taxes can simplify the process and make it easier to pay your corporation tax on time.

Corporation tax late filing penalties

So, what happens if you miss the deadline for paying corporation tax? If you file your corporation tax too late – or don’t file it at all – the HMRC can hit you with fines, penalties, and late payment interest. What are the corporation tax late filing penalties?

  • If you’re one day late, you’ll face a £100 penalty

  • If you’re three months late, you’ll face an additional £100 penalty

  • If you’re six months late, you’ll face a penalty of 10% of your unpaid tax bill

  • If you’re 12 months late, you’ll face an additional penalty of a further 10% of your unpaid tax bill

It’s important to note that corporation tax late filing penalties don’t stop there. If your tax return is late three times in a row, you’ll face £500 penalties, rather than £100 penalties. Aside from fines, corporation tax late payment interest is another potential reprisal to watch out for.

Corporation tax late payment interest

Paying corporation tax late, not paying enough corporation tax, or not paying corporation tax at all can lead HMRC to charge your company interest. Corporation tax late payment interest will be charged from the day after your tax should have been paid. The interest rate is usually 2-3% and continues indefinitely, until payment has been made.

What should I do if I can’t pay my corporation tax?

If you’re unable to pay your corporation tax, there are a couple of options you can pursue. Firstly, you should get in touch with HMRC, as they can work with you to come up with a viable solution. For example, it may be possible to pay your corporation tax in instalments under a ‘time to pay arrangement.’ Alternatively, you may be able to receive tax funding (a loan to help businesses with corporation tax late payment) that you can use to cover your tax liabilities. The worst thing you can do is ignore the problem, as HMRC will force the issue and make you repay the tax you owe.

Can you appeal against corporation tax late filing penalties?

Yes, if you have a reasonable excuse, you can write to your business corporation tax office to file an appeal. Reasonable excuses include postal delays, service issues with HMRC online services, and computer/software failure. However, depending on how late you are with payment, appeals may not be an option. For example, if your tax return is six months late, HMRC will write to you detailing how much corporation tax you need to pay. This is referred to as a ‘tax determination’ and cannot be appealed against.

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