Deadlines and accounting taxes can be quite painful, especially if the paperwork still has some ways to go and the deadline is just around the corner. For business owners new to the game, you might be asking: what will happen if you fail to meet the deadline for filing a tax return and paying your dues? So, you get to ask as well, “what happens if I miss the corporation tax deadline?”
The deadline for filing Self Assessment tax returns of self-employed entrepreneurs is on January 31st. On the other hand, there are no set dates for companies to file their corporation tax return. Instead, they need to accomplish it within 12 months from the end of their accounting period.
The filing can be done by either you or your accountant. However, the responsibility of doing so on time falls on you as the director. What do you do when you’re late filing taxes?
Don’t panic! It happens to the best of us. It may be something personal that sidetracked you, or you might just be swamped with the multitude of business responsibilities. Whatever the case, it is important to know what happens if you miss the deadline and what you can do moving forward.
What happens when you miss the corporation tax deadline?
First and foremost, the late filing of taxes involves getting charged penalties. The HMRC charges a fine of £100 for the late filing of corporate tax returns, even if it’s just a day late! Penalties increase the longer you delay and can damage your reputation with HMRC (even to the point of your business failing!), so accomplish it as soon as you can.
These are the penalties charged for the late filing of corporation tax deadline:
- 1 day late: £100 penalty
- 3 months late: an additional £100 penalty
- 6 months late: 10% of the unpaid amount (estimated by HMRC)
- 12 months late: further 10% of any unpaid taxes
The following are penalties charged for late filing of a self-assessment tax return:
- 1 day late: automatic £100 fixed penalty. (This penalty applies even when you have no tax to pay or have settled your due taxes on time. As long as you filed the tax return late.)
- 3 months late: £10 per day up to a 90-day maximum (£900)
- 6 months late: £300 or 5% of the unpaid amount, whichever is higher
- 12 months: £300 or 5% of the unpaid amount, whichever is higher
- In severe cases, you might even pay up to 100% of the tax due.
These penalties are accumulative in nature, so the longer the delay, the higher you will have to pay. Furthermore, HMRC also charges interest in late settlements of due taxes on top of the late penalties.
Don’t make a habit of filing your taxes late. The penalty increases for business owners who have missed the deadline three times in a row:
- Day 1: £500 penalty
- 3 months: £500 penalty
- 6-12months late: 10% of the unpaid amount
How do you prevent further penalties of corporation tax deadline?
Of course, that is not to say the HMRC is cold when it comes to taxes. They have to enforce strict rules when it comes to deadlines to prevent deliberate fraud and tax evasion. However, they extend leniency towards businesses with valid, excusable reasons for the late filing. In such circumstances, the committee can decide to waive the fine or charge you a lighter penalty. Just make sure to appeal the late filing charge immediately and submit the proper documents accordingly.
The HMRC will send you a notice for not filing your tax returns. You have 3 months to submit it in iXBRL format (for corporation tax) or online (for self-assessment tax returns), and submit an appeal to HMRC if you think that your reason is valid and justifiable.
Here are some justifiable excuses that HMRC considers valid:
- Death of a spouse/partner/or close relative prior to the tax return filing deadline or the due date of tax payment.
- Unexpected hospitalization that prevented you from managing tax affairs.
- You have a serious/life-threatening illness.
- Serious IT problems such as computer/software failure and malfunction while preparing your return online.
- Problems with the online services/website of HMRC.
- Loss from a disaster (fire, flood, or theft) prevents you from filing your tax return.
- Unforeseeable postal delays.
- Delays associated with your disability.
However, reasons such as the person you entrusted to send your return failed, or your cheque bounced,/the payment was unsuccessful because your funds were insufficient, are not considered valid by the tribunal. Other reasons they also do not consider a valid excuse include: finding HMRC’s website difficult to use, not receiving a reminder from HMRC, and an error was made in the tax return.
In case you made an error with your tax return, you can amend it within 22 months after the end of the accounting period.
What if you can’t afford to pay your taxes?
If your bill is correct, but you can’t afford to pay it, contact HMRC as soon as possible. This way, you avoid late payment penalties (this applies to the self-employed, as corporate taxes do not have late payment penalties). HMRC offers alternative payment arrangements for businesses struggling to pay their taxes. The helpline number is 0300 200 3822 and is open from Mondays to Fridays (8 AM to 8 PM) and Saturdays & Sundays (8 AM to 4 PM).
What can you do to avoid missing deadlines?
If you missed the deadline for filing tax returns and payment dates, don’t make the same mistake next year! Making a habit of missing your deadlines and other liabilities is not good for your credibility. Frequent late payments and filing might also subject your business to scrutiny from HMRC.
Good bookkeeping and recording practices help lessen the hassle and panic that usually grows in proportion to the looming deadline. Be meticulous with your accounting–this prevents errors in your tax returns. It also pays to keep a diary of your liabilities and their corresponding due dates and set reminders for them, so you never miss a deadline.
Of course, cash flow management is also crucial to ensure that you have enough funds to cover your payments.
If you feel overwhelmed by your tax responsibilities, hiring an expert from a trusted firm is strongly recommended. This takes away the burden from you and ensures your business’s financial responsibilities are taken care of by a trusted party.
Suppose you seek more VAT and Tax updates or more business planning to fit into the present world situation snugly. In that case, Annette & Co. is here to offer you a FREE consultation. Annette Ferguson – Chartered Accountant and Certified Profit First Professional – can help you unlock financial strategies to improve the profitability of your business amidst an economic crisis. Don’t forget to subscribe to our YouTube Channel for more quick updates.