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There are many reasons for a penalty to apply. You can find some of the most usual below:
- Late submission of documents
- Incorrect tax calculation
- Incorrect applications on tax refunds
- False information (deliberately or not)
- Failure to update HMRC on important tax and accounting matters
Of course, these are only some of the reasons and there are many more that can be added for more specific cases.
To begin with, it is important for those who have an Agent to know that each individual (tax payer, company director etc) is solely responsible for correctly presenting their details and information. Bear in mind that the HMRC's check can take place any time.
The penalties for late submissions or payments may differ for each individual case. Example of cases:
Self assessment tax returns
Construction industry Scheme
Corporate tax (CT600)
Regarding Self assessment tax return
If you are required to submit a tax form, the deadline to register is the 5th October and the deadline to submit it is the 31st January. Tax payments or in advance instalments (of 50%) must be made within this period and the rest 50% must be paid until 31st July.
If you do not submit your form in time, you will probably be required to pay a penalty of £100 for late submission.
Please see the table below for detailed information regarding late submissions and penalties:
To calculate your penalty, please click here
Regarding payroll
Since 6 April 2015 penalties have been applying for late payroll submission for companies with fewer than 50 employees. For more than 50 employees, relevant regulations have been established since October 2014.
Payroll submission refers to the responsibility of the employer to submit to the HMRC in real time any payments made to their employees and this has to be done on or before payment date.
As per regulation of Real Time Information (RTI), a Full Payment Submission (FPS) must be submitted to the HMRC on or before the payment day. Employer Payment Summary (EPS) is to be completed every month in case there are any additions, such as sick leave or maternity leave payment.
There are penalties for late submission of the above unless it is the first time, which is acceptable. You can find details about the penalties in the below table.
If the submission is more than 3 months late, HMRC might impose an additional penalty of 5% of one tax and national insurance due.
Regarding VAT
Usually you need to submit your VAT Return every 3 months. This is known as the “accounting period” and the deadline for submissions is 7 days after this period.
Your VAT Return includes the following:
your total sales and purchases
the amount of VAT you owe
the amount of VAT you can reclaim
what your VAT refund from HMRC is
You must submit a VAT Return even if you have no VAT to pay or reclaim.
If you are closing your business down, you must also submit a final VAT Return to cancel your VAT registration.
If you do not submit your VAT Return in time, this is recorded as “default”. In this case, if your business’ revenue is over £150,000, the first time you will be notified that you must submit the periodic VAT Return within the next 12 months and pay the relevant amount (if required).
If your business’ revenue is less than £150,000, you will receive a letter notifying you that the VAT Return submission and payment has been overdue. If you do not comply, the same applies as in the case for revenue over £150,000 mentioned above.
For further details, please see table below:
Please keep in mind that HMRC may charge a penalty between 15% and 100% of the due amount if the VAT Return is not correct.
Regarding Construction Industry Scheme (CIS)
You must notify HMRC every month about any payments made to subcontractors through the electronic monthly submission service.
This can be done using:
HMRC’s electronic CIS service
a commercial software
In your form you must clarify that the subcontractors mentioned are not your employees.
The deadline is the 19th day of each month after the last tax month.
Example
If you are submitting your form for the tax month 6 May to 5 June, it has to be received by HMRC by 19th June.
Penalties for late submissions:
For submissions later than these, you may have to pay a penalty up to £3,000 or 100% of the CIS deductions (whichever amount is larger).
Regarding Company Tax return (CT600)
The deadline for companies Tax Returns is 12 months after the end of the tax period. If it is submitted later than that, you will be asked to pay a penalty.
The deadline for tax payment is different and usually is 9 months and one day after the end of the accounting period.
The accounting period is usually the beginning of the month after a company is formed. For example, if a company was formed on 12 November, the accounting period is 1 December to 30 November of the following year.
Highest penalties for each error:
IMPORTANT: The penalty will be less if you notify the HMRC for the error before they find it themselves. This is known as "unprompted disclosure". If HMRC will find the error or it has been notified only because the incident will be known anyway, it is classified as "prompted disclosure".
Please see below for a table with penalties in each case:
If you do not agree with the decision made by HMRC, you can always notify the relevant department or submit an objection. Please see details for this process HERE.
Translated / Edited by, Apostolia Nestoratou
© 2020 UPECO LTD
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ATTENTION!
This article intends to give only a general informative picture and should not, in any case, be taken as a rule. It is strongly recommended to seek a full and professional guidance specifically for your circumstances before making any decisions.