Late filing penalties for limited companies

If you are working as a service provider, freelancer or as an owner of small business in the UK, it is important to maintain a track on your filing and payment deadlines along with the changing tax rates and thresholds. The sole traders need to report to HMRC, which makes the process straightforward. However, limited companies have many other things to contend with. They need to report to both HMRC and Companies House, so the opportunity to miss the deadline is greater.

The sole traders, as well as the limited companies, will face significant financial penalties if a filing or payment deadline is missed, even if there is a delay for just one day. The HMRC or Companies House are unlikely to spare you from the fine. In order to be on the top of your legal obligations, here are the important deadlines that you should not miss to avoid penalties for non-compliances

HMRC penalties:

If you miss any of the filing or payment deadline imposed by HMRC, then there will be various penalties charged based on the degree of lateness.

Self Assessment:

Self-assessment is a requirement of directors and shareholders, and members of limited liability partnership, as well as sole traders. However, if the directors who receive salary only through PAYE, then they do not have to file Self Assessment tax returns as their Income Tax and National Insurance payments are deducted from their payroll.

Deadlines:

HMRC consists of two types of penalties for self-assessment. One is for late filing of annual tax returns, and another is for the delay in payment of the Income Tax and National Insurance Contributions reported on the tax return. The deadlines include:

· Paper tax returns sent by post: 31st October subsequent to the end of every year.

· Online tax returns: 31st January after every year's end

· Payment of all Income Tax and National Insurance payable on 31st January after the tax year's end.

The following year's 6th April to 5th April is the tax year. For example, self-assessment tax returns and payments deadlines for the 2018-19 are:

· 31st October 2019 (filing paper returns)

· 31st January 2020 (filing returns online and paying tax and NIC)

If you miss the deadline of 31st October, it will not be a problem, as you can file your return online till 31st January without being charged of any penalties. It is just that you will be unable to send your return through post after the October's deadline.

Penalties of self-assessment tax return:

If the self-assessment  a tax return is delivered to HMRC after the deadline of 31st January, the financial penalties given below will be imposed:

· Missed deadline - automatic £100 fine

· 3 months late - £10 penalty on a daily basis for up to 90 days

· 6 months late - 5% of tax unpaid or £300 (whichever will be more)

· 12 months late - 5% of tax unpaid or £300 (which will be greater)

The automatic £100 penalty is charged if the deadline is missed by just one day, even if you do not owe any tax. Moreover, HMRC can charge additional penalties if it is believed that you are intentionally trying to evade tax.

Penalties charged for late payment of self-assessment tax bill

· 30 days late - 5% of the tax due

· 6 months delay - 5% of tax due at the date

· 12 months - 5% of the tax unpaid at that date

Value-added tax: (VAT)

HMRC charges increasingly strict penalties for VAT-registered businesses, which miss numerous deadlines. Your VAT return and other details related to the payment deadlines will be found in your online VAT account.

You will need to enter a 12-month 'surcharge period' if you are marked default for missing a filing deadline or failed to pay the VAT applicable on you within the due date. You will be receiving a letter from HMRC in your registered office address, which will explain the surcharges you owe and what will occur if you default again?

If you default again during the surcharge period then the following things will take place:

· The add-on period will be extended for a period  of 12 months

· You need to pay an extra amount ('surcharge') along with the VAT applicable on you

Go through the table below to get a proper idea of the surcharges:

Defaults within 12 months

Surcharge if annual turnover is below £150,000

Surcharge if annual turnover is £150,000 or more

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 times

15% or £30 (whichever is more)

15% or £30 (whichever is more)

 

Exceptions:

However, HMRC will not implement a surcharge if your submission of a late VAT return is due to the following circumstances:

· You disburse the full VAT amount by the due date

· You do not have any VAT return to pay

· You are due with a VAT repayment already.

Penalties:

You may get penalised up to:

· 100% of any tax under-stated or over-claimed if the HMRC receives VAT return, which contains a careless or deliberate inaccuracy.

· 30% of an assessment in HMRC sends you one that is very low and you do not inform them about the mistake within 30 days.

· £400 if you submit a paper VAT Return until HMRC has told you that you are exempt from submitting your return online. 

Corporation Tax:

HMRC implement Corporation Tax penalties because of the late filing of annual Company Tax Returns (that should include full annual accounts) and late payment of the Corporation tax owed by the limited company. The penalties get higher over time, as mentioned below:

· 1 day late - automatic £100 penalty

· 3 months late - £100 penalty

· 6 months - 10% penalty added to estimated tax bill

· 12 months - 10% penalty added to estimated tax bill

The deadline for filing your tax return and full statutory accounts are 12 months subsequent to your company's Corporation tax accounting period.

The deadline for paying all the payable corporation tax of your company is 9 months and 1 day subsequent to the end of your Corporation Tax accounting period. Failing to this can charge you 3% of any outstanding tax payments as a penalty.

Construction Industry scheme:

Contractors who are working under the Construction Industry Scheme (CIS) will need to pay additional penalties if they miss the deadlines for submitting their CIS returns. The penalties charged depending upon the time span are outlined below:

· 1 day late - automatic £100 penalty

· 2 months late - £200 penalty

· 6 months late - £300 penalty or 5% of CIS  deduction, whichever will be more

· 12 months late - £300 penalty or 5% of CIS deductions, whichever will be greater

Companies House Penalties:

The limited companies and the limited liability partnerships need to report to Companies House. It is the responsibility of a designated member of an LLP to ensure that the business meets its statutory deadlines to avoid the penalties.

Annual accounts:

Whether you run an active or dormant company limited by shares, a company limited by guarantee or LLP, failing to deliver annual financial accounts can lead to the Companies House imposed penalties given below:

Time after deadline

Penalty

No more than 1 month

£150

More than 1 month but not more than 3 months

£375

More than 3 months but not more than 6 months

£750

More than 6 months

£1500

 

If your accounts are delivered late by a stretch of 2 years, then the penalty will be doubled automatically.

Deadlines:

Your company's first accounts after the incorporation must be given to the Companies House within 21 months after the registration date of your company.

Confirmation statement: (previously the annual return)

Companies House will not enforce any financial penalties if your confirmation statement is delivered after the filing deadline. However, your firm is liable to be struck off from the register, your credit rating might be affected, and the directors can be prosecuted.

Appealing against late filing penalties:

You should prove that the failure to submit accounts resulted from exceptional circumstances, which was not in your control, for example, fire, theft, death or severe illness. Companies House will not accept the reasons mentioned below:

· You forgot

· The company is dormant

· You cannot afford to make payment of a penalty that is already enforced

· It was the fault of your accountant or the other nominated individual

· You were not aware how or when to file accounts

· The director was not present during that time

If you want to appeal against a late filing penalty, you need to send a letter to the address, which is provided on the front page of the penalty invoice. Otherwise, you can send an email to enquiries@companies-house.gov.uk by stating the penalty reference. You will get a response approximately within 10 working days. The penalty will not be taken from you if the appeal is pending.

However, if anyhow your appeal is rejected, then you can write to the Senior Casework Unit (SCU) in the Late Filing Penalties Department at the Companies House Office that deals with your account.

If your appeal is rejected even by the SCU, you can write the Independent Adjudicators and request for a review of your case.

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