If you can’t pay your corporation tax, HMRC late payment interest for begins on the day the tax should have been paid and ends on the day the unpaid tax is settled.
Interest penalty is charged automatically but only on the debt itself, not the interest that follows. For a full list of the latest interest rates you can visit HMRC’s page here.
- Late payment interest rate – 2.75% from 23 August 2016
- Repayment interest rate – 0.5% from 29 September 2009
Is Late Payment Interest Tax Deductible?
This interest penalty is tax deductible for corporation tax purposes, meaning it can be included as an expense in company accounts for the tax year in question.
What if You’re Paying your Corporation Tax in Instalments?
For larger businesses making a profit of more than 1.5 million, corporation tax will customarily be paid in instalments. The means of payment, in this case, makes no difference to a company’s liability for late payments on unpaid tax. Interest on any late instalment payment penalties applies from each of the instalment payment due dates though it’s worth noting that it isn’t calculated until after the accounting period (nine months and one day after the end of the accounting period.) Also, one of the following two things should have occurred:
- The submission of a company tax return
- If a return was not submitted on time, HMRC would have made a determination on tax liability.
There are two Interest Rates for late Payment on Corporation Tax Instalments:
- The lower rate (aka debit interest) runs from each of the instalment payment due dates to the normal due date (nine months and one day from the end of the accounting period)
- The higher rate runs after the normal due date.
Can you Object to Paying Interest on your Corporation Tax?
Appealing against an interest charge penalty isn’t possible. However, if you feel there has been a mistake in the calculation, then you are free to make a legitimate objection against your tax return.