If your tax return is late 3 times in a row, the £100 penalties are increased to £500 each.
If your tax return is 6 months late, HMRC will contact you with a ‘tax determination[1]Trusted Source – GOV.UK – HMRC Tax Determinations’ telling you how much Corporation Tax they think you must pay. You cannot appeal against this.
What are the Corporation Tax Penalties for Late Payment?
There are no specific penalties for late Corporation Tax payments. However, you’ll be charged interest on any arrears.
The interest rates[2]Trusted Source – GOV.UK – HMRC Interest Rates charged by HMRC are set in legislation and are linked to the Bank of England base rate.
Late payment interest: This is charged on late payments and is set at the base rate plus 2.5%.
Repayment interest: This is the interest HMRC pays on overpaid tax and is set at the base rate minus 1%, with a lower limit of 0.5% (known as the ‘minimum floor’).
The current late payment and repayment interest rates applied to corporation tax are:
From
Late Payment %
Repayment %
22 August 2023
7.75
4.25
HMRC’s Right to Request a Security Bond
HMRC has the right to request a security bond from your company if they have concerns about potential non-payment of Corporation Tax. This is a type of financial guarantee or deposit that can take various forms, such as cash deposits, bank guarantees, insurance policies, or a third-party guarantee.
HMRC will determine the specific amount of the security bond based on their assessment of the potential Corporation Tax liability at risk and the perceived level of risk of non-payment.
FAQs
What triggers an HMRC investigation into corporation tax payments?
An HMRC investigation can be triggered by discrepancies in tax returns, late submissions, or failure to pay the due amount. Regular audits are also a common practice to ensure compliance.
How can I correct a mistake on my corporation tax return before incurring a penalty?
If you discover an error on your corporation tax return, you should amend the return as soon as possible. HMRC allows corrections within 12 months of the statutory filing date without penalty.
What are the consequences of repeated non-compliance with corporation tax payments?
Repeated non-compliance can lead to increased penalties, including higher fines and potential legal action. Continued failure to comply can severely impact a business’s financial health and operational capability.
How do I dispute a corporation tax penalty from HMRC?
To dispute a penalty, you must initially contact HMRC to explain your reasons for disagreement. If unresolved, you can formally appeal the decision, a process for which HMRC provides guidelines on their website.
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
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