Corporation Tax Penalty Regime

Have you ever wondered what the fine would be if you got your corporation tax wrong?

This post will explain at a high level what the penalties are currently.


The answer differs depending on what kind or error you have made:


- For failure to notify that you are liable to corporation tax, you are charged a percentage of the tax unpaid 12 months after the end of your accounting period. This percentage varies depending on if your failure was deliberate and concealed (maximum 100%), deliberate but not concealed (maximum 70%) or in an other case a maximum charge of 30%. This can be reduced for prompted disclosure and may be reduced to nil for unprompted disclosure. It is a similar process for incorrect returns.


- For late returns the penalty is an immediate £100 fine then potential penalties of £10 per day for a maximum of 90 days where returns are more than 3 months late. If the return is more than 6 months late you will be charged 5% of the tax liability or £300 if greater. If the return is more than 12 months late you will be charged depending on whether your act is deliberate and concealed etc. as above but for non-deliberate acts the charge is 5%, usual reductions for disclosures apply.


- For late payment of tax, 5% of the outstanding tax is charged on the filing date, and again 3 months after that and again 9 months after the filing date.


Other points worth noting are that there is a £3,000 fine for failure to keep records 6 years after the end of the accounting period. Also if a company fails to provide documents during an enquiry there is a £300 penalty and further penalties of £60 per day may be imposed.


Penalties can be avoided if there is a reasonable excuse, or it can be reduced if special circumstances apply. HMRC may differ with the taxpayer on what defines "reasonable" however!