HMRC have certain rules and regulations that need to be met with regards to filing and payment deadlines. This is usually quite straightforward for the average self-employed person working as a sole trader, freelancer, contractor or small business owner who only need to report their figures directly to HMRC. However, if you are a limited company, there are a few extra filing and reporting requirements that you are expected to meet.

Firstly, limited companies are required to report to both HMRC as well as to Companies House. You will have certain deadlines to meet and failure to do so will result in you receiving a hefty fine for non-compliance.

While it is true that both limited companies and sole traders can face unwanted fines and penalties should they fail to meet a filing or payment deadline, appealing your fine will often fall on deaf ears as both HMRC and Companies House show little mercy here. They insist that all deadlines are well documented and that individuals and companies are given plenty of notice in advance of an impending deadline. Basically it is your responsibility to meet these deadlines or face hefty penalties for not doing so.

We understand that running a business is not easy. For this reason we have listed here the most important deadlines that you must meet as limited company and what penalties you will face for failing to meet them.

Content summary:

1. HMRC penalties

1.1. Self Assessment

1.1.1. Deadlines

1.1.2. Penalties for late Self Assessment tax return

1.1.3. Penalties for late payment of Self Assessment tax bill

1.1.4. Insufficient funds to pay your tax bill?

1.2. Value Added Tax (VAT)

1.2.1. Exceptions

1.2.2. Penalties

1.3. Corporation Tax

1.3.1. Late filing of Company Tax Return & Annual Accounts

1.3.2. Late payment of Corporation Tax

1.4. Construction Industry Scheme

2. Companies House penalties

2.1. Annual Accounts

2.1.1. Deadlines

2.2. Confirmation Statement

2.2.1. Appealing against late filing penalties

1. HMRC penalties

Submitting your filing or payments by your set deadlines is very important as missing any deadlines imposed by HMRC can result in fines. These can be in the form of various on-the-spot penalties or tiered fines based on the degree of lateness. The longer you leave a filing or payment, the greater the fine imposed.

1.1. Self Assessment

For sole traders, limited company directors and shareholders, and members of Limited Liability Partnerships, HMRC requires a self assessment to be submitted each year. There are exceptions for directors who only receive a salary via the PAYE system rather than receiving income from other sources, such as dividends, director’s loan payments etc. In this case their Income Tax and National Insurance is collected through payroll, so no self-assessment submission is needed here.

1.1.1. Deadlines

There are two types of penalties applied for Self Assessment by HMRC. The first is a penalty for late filing of annual tax returns. The second is for late payment of Income Tax and National Insurance Contributions reported on the tax return. There are set deadlines for self-assessment submission that are the same for everyone and never change, so no-one should be confused about the dates:

• Paper tax returns sent by post: 31st October after the end of the tax year.

• Online tax returns: 31st January after the end of the tax year.

• Payment of all Income Tax and National Insurance owed: 31st January after the end of the tax year.

The tax year runs from 6th April each year to the 5th April the following year. So the Self Assessment tax returns and payments deadlines for the 2017-18 tax year, which runs from April 6th 2017 until 5th April 2018 are:

• 31st October 2018 (filing paper returns)

• 31st January 2019 (filing online returns and paying tax and NIC)

Many people tend to put off sending their personal tax return thinking that they have plenty of time to complete it. This can often lead to it being forgotten about. This is why it is wise to complete and send off your personal tax return soon after the end of each tax year. This way you can get it out of the way quickly and will prevent you from missing the deadline and incurring a fine for late submission.

There is one saving grace here. If you should miss the 31^st October deadline for your self-assessment, you can still meet the 31^st January deadline by submitting your return online instead. By doing this you will not incur any penalties, but do remember that you cannot send your paper copy to HMRC after the October deadline.

1.1.2. Penalties for late Self Assessment tax return

Should you miss the 31^st January self-assessment deadline for whatever reason, you will receive a financial penalty for non-compliance. Here is a list of fines applied by HMRC:

• Missed deadline – an automatic £100 fine, even when one day late

• 3 months late – a £10 daily penalty for up to 90 days

• 6 months late – a 5% of tax due or £300 (whichever is greater)

• 12 months late – a 5% of tax due or £300 (whichever is greater)

Even if you earn below the personal income tax threshold and don’t owe any tax, you will still receive the automatic £100 penalty even if you miss the deadline by just one day. There are also stiff penalties should HMRC believe you are intentionally withholding your information or trying to evade paying your tax.

1.1.3. Penalties imposed for late payment of Self Assessment tax bill

• 30 days late – 5% of tax due

• 6 months late – 5% of tax due at that date

• 12 months – 5% of tax due at that date

On top of what is stated above, HMRC will also impose an extra 3% interest on your overdue taxes until you completely clear what you owe in full. Read more here about what to do if you cannot pay your self-assessment tax bill.

1.1.4. Insufficient funds to pay your tax bill?

If you are lacking the available funds to pay your tax bill by your deadline, then you should contact HMRC’s Business Payment Support Service to explain why. You should check to see if they will accept a payment plan from you to pay your taxes over a longer period of time. Some people, especially those running small businesses, can experience temporary financial difficulties where they may be awaiting payment from a larger company for goods of services. HMRC are aware that people can experience longer waiting times for payments that can tie up cash flow, and can be very understanding under these circumstances.

Approaching HMRC with your issues rather than ignoring them can be the best solution if you know that you can experience cash flow problems that can lead to delayed payments of tax. Quite often taking this proactive approach can mean you avoid facing some financial penalties usually imposed by HMRC.

For further information see HMRC’s guide to Self Assessment deadlines and penalties.

1.2. Value Added Tax (VAT)

Your company VAT return and payment date deadlines can be found in your VAT online account. Your deadlines will normally fall on the same day, usually 1 calendar month and seven days following the end of each accounting period. These may be different should you have registered for the VAT Annual Accounting Scheme. Be aware that HMRC impose harsh fines for any company failing to meet their VAT return deadlines.

As a VAT registered company, you will have a 12-month ‘surcharge period’ for VAT. Should you miss a filing deadline or fail to pay what VAT you owe by the due date, you will receive a letter from HMRC stating the surcharges you owe and the consequences should you default once again. This letter will be addressed to your registered office address, so make sure you don’t ignore any official mail from coming from HMRC.

Those businesses who default again during a surcharge period will see the surcharge period being extended for another 12 months. You may end up paying and extra surcharge fee on top of the VAT you owe.

How a surcharge is worked out is that a percentage of your outstanding VAT is added on at the due date for the default accounting period. The surcharge rate increases each time you default within a surcharge period. However, you won’t have to pay anything extra for your first default.

Defaults within 12 months:

Surcharge if annual turnover is below £150,000

• 2^nd default – No surcharge

• 3^rd default – 2% (no surcharge if this is less than £400)

• 4^th default – 5% (no surcharge if this is less than £400)

• 6^th or more defaults – 15% or £30 (whichever is more)

Surcharge if annual turnover is £150,000 or more

• 2^nd default – 2% (no surcharge if this is less than £400)

• 3^rd default – 5% (no surcharge if this is less than £400)

• 4^th default – 10% or £30 (whichever is more)

• 5^th default – 15% or £30 (whichever is more)

• 6^th or more defaults – 15% or £30 (whichever is more)

1.2.1. Exceptions

There are some circumstances where HMRC will not impose a surcharge for submitting a late VAT return. These are because:

• You are due a VAT repayment.

• You don’t have any VAT to pay.

• You pay your VAT in full by the due date.

1.2.2. Penalties

You may receive a penalty of up to:

• £400 if you submit a paper VAT Return, unless HMRC has told you you’re exempt from submitting your return online.

• 100% of any tax under-stated or over-claimed if you send a VAT return that contains a careless or deliberate inaccuracy.

• 30% of an assessment if HMRC sends you one that’s too low and you don’t tell them it’s wrong within 30 days.

1.3. Corporation Tax

Corporation Tax penalties can be applied by HRMC for a number of reasons. These include late filing of annual Company Tax Returns, that must also include a copy of your full annual accounts, and late payment of any Corporation tax owed by your limited company. Be aware that these penalties can increase over time, so it doesn’t pay to keep them waiting. Here are the charges you can expect to receive for non-compliance:

1.3.1. Late filing of Company Tax Return & Annual Accounts

• 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 delivering your tax return and full statutory accounts is 12 months after the end of your company’s Corporation Tax accounting period.

1.3.2. Late payment of Corporation Tax

• 3% of any outstanding tax payments

The deadline for paying all the Corporation Tax owed by your company is 9 months and 1 day after the end of your Corporation Tax accounting period.

1.4. Construction Industry Scheme

For contractors working under the Construction Industry Scheme (CIS), additional penalties will be applied for failing to submit their CIS return by the deadline:

• 1 day late – automatic £100 penalty

• 2 months late – £200 penalty

• 6 months late – £300 penalty or 5% of CIS deductions (whichever is greater)

• 12 months late – £300 penalty or 5% of CIS deductions (whichever is greater)

2. Companies House penalties

Limited companies and Limited Liability Partnerships are also required to report to Companies House as well as HMRC. It is the responsibility of the company director or company secretary, or a designated member of an LLP to meet with all statutory deadlines imposed by Companies House. Failure to do so can incur stiff penalties as detailed below:

2.1. Annual Accounts

Regardless of whether your run an active or dormant company that is limited by shares, limited by guarantee or an LLP, you are still responsible for preparing and delivering a set of annual accounts to Companies House. Your accounts can be submitted as full, abbreviated or dormant depending on your circumstances. However, failure to do so can result in the following fines being imposed:

Penalty time after deadline:

• 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

Your penalty will automatically be doubled should your accounts be delivered late 2 years in a row.

2.1.1. Deadlines

Once incorporated, you will need to submit your first set of company accounts to Companies House no later than 21 months after the date of your company’s registration (the date of incorporation).

Following on from this you should submit your accounts to Companies House each year no longer than 9 months after your accounting reference date (ARD), which is the end of your company’s financial year.

2.2. Confirmation Statement

Your confirmation statement now replaces the annual return. You will not incur any financial penalties should your confirmation statement be submitted after your filing deadline. However, please be aware that you do need to submit one or face being struck off the register for failing to do so.

2.2.1. Appealing against late filing penalties

Under some circumstances you may be able to appeal against late filing penalties imposed by Companies House. However, there must have been quite exceptional circumstances that can be proven for this to be accepted. Such circumstances could include:

• death
• fire
• flooding
• severe illness
• theft

Companies House will not accept the following reasons for late submission of accounts or penalty payments:

Failure was the fault of your accountant or other nominated individual

• The company is dormant
• The director lives or was travelling overseas at the time
• You cannot afford to pay a penalty already imposed
• You did not know how or when to file your accounts
• You forgot
• Your accounts were delayed or lost in the post

Should you wish to appeal against a late filing penalty, you must send a letter to the address that is stated on the front page of the penalty invoice. If you prefer, you can send an email to [email protected] stating the penalty reference listed on your invoice.

It can take up to ten working days to receive a response. Your penalty payments will be put on hold while your appeal is pending.

Should your appeal be rejected, 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.

Should your appeal be rejected by the SCU, you can write to the Independent Adjudicators and request that your case be reviewed.

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