Fines & Penalties for Late Filing

Making sure that you have your accounts and finances in order can often be a bit of a chore but doing so means you’ll save yourself a lot of hassle, stress and possibly money – especially if you procrastinate and file late. Missing filing deadlines will result in penalties that increase over time, so it’s important to notate important dates that are relevant to your business and personal finances, and remember to set a reminder at least a few weeks before deadline day. Yes, you may get a letter requesting that you file your returns by such and such a date, but let’s be realistic, it’s getting buried in paperwork – you’ll find it next year when you do your annual desk clean!

In 2020 alone just under a million people failed to complete their self-assessments on time and faced the consequences. It’s better to get things sorted as soon as possible.

Ezyco top tip. As soon as you have the necessary paperwork to file your taxes, do it. There is no reason to wait, you’ll thank yourself later in the year.

So what happens if you do miss a filing deadline?

SELF-ASSESSMENT

Failing to file a self-assessment tax return before deadline will result in a rather swift conversation between yourself and HMRC. From the first day you will incur a penalty… and it’s not cheap. If you neglect to file still then things will only get worse – here’s the full run down.

DURATION
PENALTY
Missed deadline by 1 day
£100 Penalty
Missed deadline by 30 days
5% of tax owed
Missed deadline by 3 months
£10 per day for 90 days totaling £900
Missed deadline by 6 months
5% of tax owed Or £300 depending on which is greater
Missed deadline by 12 months
5% of tax owed Or £300 depending on which is greater
Missed deadline by 12 months by intentionally holding back information for HMRC (Concealed)
100% of tax owed Or £300 depending on which is greater
Missed deadline by 12 months by intentionally holding back information for HMRC (Not concealed)
70% of tax owed Or £300 depending on which is greater

CORPORATION TAX

When a business is incorporated as a limited company they use the last day of the month they are set up as their accounting reference date, ie. a business set up on 12 April will prepare its accounts and corporation tax return to 30 April every year.

Once the accounting reference date has been passed, a business has 1 year from that date to submit their corporation tax return. It is up to the company director to ensure that all information is accurate and submitted to HMRC on time (again – we can’t stress it enough, set calendar reminders and file early!).
Late filing penalties apply to companies that miss their CT return deadline, and while it can prove financially costly for the company it also damages their reputation and credibility with HMRC.

So, what penalties are incurred if deadlines are missed?

DURATION
PENALTY
Missed deadline by 1 day
£100
Missed deadline by 3 months
£100
Missed deadline by 6 months
HMRC estimates your tax bill determination with an additional 10% penalty.
Missed deadline by 12 months
10% of all unpaid tax

Once the deadline has passed the company will need to contact HMRC as soon as possible (they won’t make too much effort to chase you). Failure to do so will result in HMRC taking legal action.
At six months HMRC will contact you with their ‘tax determination’. This is their estimate as to how much tax they believe you have to pay. This is not something you can appeal, it must be paid. If you fail to return your corporation taxes three times in a row then the penalties increase from £100 to £500.

Should the situation not be handled properly it can cause businesses to become in such a poor state financially that it could lead to bankruptcy and closure.

LIMITED COMPANY ACCOUNTS

In addition to filing a corporation tax return, businesses must also file their end of year accounts with both Companies House and HMRC. Accounts will be prepared to the same accounting reference as the corporation tax return, however the deadline for filing accounts with Companies House is different to the deadline for filing the corporation tax return to HMRC.

Businesses have 9 months from their accounting reference date to file their accounts with Companies House. So, our example business with an accounting reference date of 30 April must file their accounts no later than the following 31 January. Should you miss the filing deadline, Companies House will issue a late filing penalty. This penalty is only issued once the accounts have been received so that the penalty can be calculated according to the following breakdown.

DURATION
PENALTY
Missed deadline by no more than 1 month
£150
Missed deadline by more than 1 month but not more than 3 months
£375
Missed deadline by more than 3 month but not more than 6 months
£750
Missed deadline by more than 6 months
£1,500

If your accounts are filed late in 2 successive years, the second filing penalty is doubled.

Not filing your business’ accounts is a criminal offence and as it is the director’s responsibility to ensure the accounts are filed on time you could be personally fined and the company struck off. Not paying late filing penalty can also result in court proceedings.

APPEALS

If you do receive a penalty and feel it’s possibly unjustified for one reason (perhaps a situation outside of your control arose which stopped you from filing before the deadline), you are within your rights to appeal the decision/penalty.

A couple of the suggested reasons are pretty bleak, so you’d most likely not want to be in the position of appealing, but, a few examples may be:

  • Partner or close relative passed away shortly before the deadline.
  • You are suffering from a life threatening illness or injury.
  • Delays that could be related to any disabilities you may have.
  • Destruction or events that prevent you completing your return (fire, flood, theft, etc)
  • Your computer software stopped functioning shortly before the deadline.
  • Affected to a reasonable degree by COVID-19.
  • Postal delays that were no fault of your own.
  • The HMRC and/or Companies House online services stopped functioning.

Once your appeal has been processed and resolved you must ensure that you send your completed return as soon as possible. If you do not notify HMRC or Companies House of anything that could be considered a viable reason for late filing then you may incur additional penalties.

As mentioned above, our advice: set reminders, file early, keep your paperwork in order and, to ensure you have all of your dominos lined up – give us a call! We’re experts in filing all kinds of tax returns, and we’d love to work with you.

Helena

Chat with our Ltd. Company Account Manager Helena

fines for late filing
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