HMRC and Companies House Penalties: Late Filing and Payment 2024 Explained

Late filing and late payment penalties can be a significant burden for businesses and individuals alike. In the UK, HM Revenue and Customs (HMRC) and Companies House are the two main organisations responsible for enforcing these penalties. If you fail to file your tax return or accounts on time, you may be liable for a range of penalties, including fines, interest charges, and even legal action.

HMRC oversees the enforcement of penalties for late filing and payment of taxes such as income tax, corporation tax, and VAT. The penalties can be steep, with fines for late tax returns ranging up to £1,600 based on the delay’s duration. Similarly, Companies House mandates penalties for delayed filing of company accounts and statutory documents, where fines can reach up to £1,500 annually, with additional penalties for consistent delays. For businesses aiming to maintain compliance, referring to our Company Year-End Accounts Checklist for Limited Companies can prove invaluable.

Navigating the complexities of late filing and payment penalties requires a thorough understanding of the governing rules and regulations. This article delves deeper into these penalties, highlighting the roles of HMRC and Companies House, the various penalties applicable, and strategies to avoid them.

Understanding Penalties for Late Filing and Payment

Understanding the implications of late filings and payments is crucial for UK businesses. HMRC and Companies House impose these penalties to encourage timely compliance. For those new to business or needing a refresher on filing tax returns correctly and on time, our guide on Completing a Self-Assessment Tax Return offers step-by-step assistance.

Overview of Late Filing Penalties

Late filing penalties are charged by Companies House if you fail to file your company’s annual accounts and confirmation statement on time. The penalty is an automatic penalty and is imposed on the day after the filing deadline. The amount of the penalty depends on how late the filing is.

For example, if you file your company’s accounts one day late, the penalty is £100. If you file it three months late, the penalty is £375. If you file it six months late, the penalty is £750. If you file it more than 12 months late, the penalty is £1,500.

Overview of Late Payment Penalties

Late payment penalties are charged by HMRC if you fail to pay your taxes on time. The penalty is an automatic penalty and is imposed on the day after the payment deadline. The amount of the penalty depends on how late the payment is.

For example, if you pay your taxes 30 days late, the penalty is 5% of the tax due. If you pay it six months late, the penalty is 5% of the tax due at that date. If you pay it 12 months or more late, the penalty is 5% of the tax due at that date, plus another 5% of the tax due at the 12-month point.

It is important to note that late payment penalties are charged in addition to interest on the amount of unpaid tax. The interest is charged from the day after the payment deadline until the date the tax is paid in full.

HMRC and Companies House: Key Differences

If you’re a UK business owner, you need to be aware of the differences between HMRC and Companies House. Both organizations are concerned with your business, but they have different roles and responsibilities.

Responsibilities of HMRC

HMRC (Her Majesty’s Revenue and Customs) is the UK’s tax authority. They are responsible for collecting taxes from individuals and businesses. HMRC also provides guidance and support to businesses to help them comply with tax laws.

If you’re a business owner, you need to register with HMRC and file your tax returns on time. Failure to do so can result in penalties and fines. HMRC also has the power to investigate businesses suspected of tax evasion or fraud.

Responsibilities of Companies House

Companies House is the UK’s official register of companies. They are responsible for incorporating and dissolving companies, as well as maintaining the public register of companies and their directors.

If you’re a business owner, you need to register your company with Companies House and file your annual accounts on time. Failure to do so can result in penalties and fines. Companies House also has the power to strike off companies that are no longer trading or are not complying with their legal obligations.

Key Differences

UK business owners must distinguish between HMRC and Companies House, as each has different roles and responsibilities. HMRC focuses on tax collection and compliance, while Companies House handles company registration and documentation. Businesses need to register with both entities and comply with their regulations to avoid penalties. Failure to do so can lead to significant financial penalties and, in severe cases, legal action. Understanding these differences can help in more effective business management and compliance. For a detailed explanation of financial statements and responsibilities, consider our guide on the Limited Company Statement of Financial Position (formerly Balance Sheet).

Penalties for Late Filing of Documents

When it comes to filing documents with HMRC and Companies House, it’s important to do so on time. Failure to do so can result in penalties being imposed. In this section, we’ll take a look at the penalties for late filing of documents and what you need to know.

Annual Accounts and Reports

If you’re a limited company, you must file annual accounts with Companies House. The deadline for filing your accounts is usually 9 months after your company’s financial year-end. If you file your accounts late, you can expect to receive a penalty from Companies House.

The amount of the penalty depends on how late your accounts are. For example, if your accounts are up to 1 month late, you’ll be fined £150. If they’re between 1 and 3 months late, the penalty increases to £375. For accounts that are more than 6 months late, the penalty can be as high as £1,500.

Confirmation Statements and Annual Returns

As a limited company, you must also file a confirmation statement with Companies House each year. This statement confirms that the information held by Companies House about your company is up to date. The deadline for filing your confirmation statement is usually 14 days after the anniversary of your company’s incorporation.

If you fail to file your confirmation statement on time, you can expect to receive a penalty from Companies House. The amount of the penalty depends on how late your confirmation statement is. For example, if your confirmation statement is up to 1 month late, you’ll be fined £100. If it’s between 1 and 3 months late, the penalty increases to £250. For confirmation statements that are more than 6 months late, the penalty can be as high as £500.

It’s worth noting that late filing penalties are separate from any penalties that may be imposed by HMRC for late payment of tax. If you’re struggling to file your documents on time, it’s important to seek professional advice to avoid penalties and potential legal action.

Penalties for Late Payment of Taxes

If you fail to pay your taxes on time, HM Revenue and Customs (HMRC) will charge you late payment interest. The interest is charged on the amount of tax that is unpaid after the due date, and the rate is currently 7.75%.

Income Tax and Corporation Tax

If you are late paying your Income Tax or Corporation Tax, you will be charged interest on the amount you owe. The interest will be charged from the date the payment was due until the date it is paid. The interest rate is set by HMRC and is currently 7.75%.

If you are unable to pay your tax bill on time, you should contact HMRC as soon as possible to discuss your options. You may be able to set up a payment plan or agree on a time to pay arrangement.

PAYE and National Insurance

If you are an employer and you are late paying your PAYE and National Insurance contributions, you will be charged interest on the amount you owe. The interest will be charged from the date the payment was due until the date it is paid. The interest rate is set by HMRC and is currently 7.75%.

If you are unable to pay your PAYE and National Insurance contributions on time, you should contact HMRC as soon as possible to discuss your options. You may be able to set up a payment plan or agree on a time to pay arrangement.

It is important to note that if you continue to miss payments or fail to make arrangements to pay your taxes, HMRC may take legal action against you. This could result in additional penalties and charges. Therefore, it is important to keep up to date with your tax payments and to contact HMRC if you are having difficulty paying.

How Penalties are Calculated

Late filing and late payment penalties are calculated differently and can vary depending on the type of entity and the amount owed. It is important to understand how these penalties are calculated to avoid unnecessary charges.

Calculating Late Filing Penalties

Late filing penalties are charged by Companies House for submitting accounts or confirmation statement late. The penalty is calculated based on the number of days that the accounts or confirmation statement are late. The penalty starts at £150 for a delay of up to one month, and increases to £375 for delays of up to three months. For delays of up to six months, the penalty increases to £750, and for delays of up to 12 months, the penalty can reach £1,500. In addition to the penalty, interest may also be charged on the outstanding amount.

Calculating Late Payment Penalties

Late payment penalties are charged by HMRC for failing to pay tax on time. The penalty is calculated based on the amount of tax that is unpaid after the due date. The penalty starts at 2% of the unpaid tax after 15 days and increases to 4% after 30 days. If the tax is still unpaid after 6 months, an additional penalty of 5% of the unpaid tax is charged. If the tax is still unpaid after 12 months, another 5% penalty is charged. Interest is also charged on the outstanding amount.

To avoid late filing and late payment penalties, it is important to keep accurate records and submit accounts and tax returns on time. If you are struggling to pay your tax bill, it is important to contact HMRC as soon as possible to discuss payment options.

Payment Methods and Details

Late filing and late payment penalties can be paid through various methods, including electronic and manual payment options. Here are some details you need to know about the payment methods and information required for payment.

Electronic and Manual Payment Options

Electronic Payment Options

The easiest and fastest way to pay late filing and late payment penalties is through electronic payment options. You can pay using BACS, bank transfer, or credit card. To pay electronically, you will need the following information:

• Sort code
• Account number
• Account name

Manual Payment Options

If you prefer to pay manually, you can pay by cheque or bank transfer. To pay by cheque, make the cheque payable to “Companies House only” and send it along with the slip on the penalty notice (“remittance advice”) to Companies House at PO Box 710, Crown Way, Cardiff, CF14 3UZ. To pay by bank transfer, you will need the following information:

• Sort code
• Account number
• Account name
• Reference number on the penalty notice

Information Required for Payment

When paying late filing and late payment penalties, you will need to provide the following information:

• Penalty reference number
• Company name
• Company registration number
• Amount due

If you are paying from an overseas account, you will also need the following information:

• Swift code
• IBAN number

Make sure to double-check all the information before making the payment to avoid any errors or delays in processing.

Appealing Against Penalties

If you have received a penalty notice from HMRC or Companies House for late filing or late payment, you have the right to appeal the decision. However, you must have valid grounds for appeal and follow the correct appeals process.

Grounds for Appeal

You can appeal against a penalty if you have a reasonable excuse for filing or paying late. HMRC and Companies House have different definitions of what constitutes a reasonable excuse, but some common grounds for appeal include:

• Serious illness or injury
• Bereavement
• Fire, flood, or theft
• Technical issues with online filing systems
• Postal delays
• Mistakes made by HMRC or Companies House

It’s important to note that ignorance of the law or forgetfulness are not considered reasonable excuses.

The Appeals Process

If you want to appeal against a penalty, you must do so within 30 days of receiving the notice. You can appeal online, by post, or by phone, depending on the penalty and the agency involved.

When making your appeal, you should provide as much information as possible to support your grounds for appeal. This may include medical certificates, evidence of postal delays, or screenshots of error messages.

After receiving your appeal, HMRC or Companies House will review your case and make a decision. If your appeal is successful, the penalty will be cancelled or reduced. If your appeal is unsuccessful, you may be able to take further action, such as appealing to a tribunal.

Appealing against a penalty can be a lengthy and complex process, so it’s important to seek professional advice if you’re unsure about your grounds for appeal or the appeals process.

Avoiding Penalties: Compliance and Best Practices

Late filing and late payment penalties can have a significant impact on your business. Therefore, it is essential to maintain compliance with filing deadlines and ensure timely payment of taxes. In this section, we will discuss the best practices that you can follow to avoid penalties.

Maintaining Compliance with Filing Deadlines

One of the best ways to avoid penalties is to maintain compliance with filing deadlines. Companies House requires that you file your annual accounts and confirmation statement within nine months and 14 days of the end of your financial year. Failure to do so can result in a late filing penalty.

To maintain compliance, you need to keep track of your deadlines and ensure that you submit your documents on time. You can set up reminders or use online tools to help you stay on top of your filing deadlines. Additionally, you can seek support and advice from qualified professionals to ensure that you are meeting all of the necessary requirements.

If you are unable to file your documents on time, you can request an extension. However, it is important to note that extensions are not always granted, and you may still be subject to penalties if you file your documents late.

Ensuring Timely Payment of Taxes

Ensuring compliance with filing deadlines and timely tax payments is paramount to avoid penalties. This section of our guide offers best practices for maintaining compliance and effectively managing your business finances. Keeping accurate records and being aware of your filing and payment deadlines can help mitigate the risk of incurring penalties.

For businesses seeking tailored accounting solutions, our Who We Help sections, such as Sole Trader Accounting and Small Business Accountants, provide targeted services designed to meet diverse business needs.

Support and Resources for Businesses

If you are struggling with compliance with HMRC and Companies House requirements, there are several support services available to help you. This section will provide information on how to contact HMRC and Companies House, as well as support services for compliance.

Contacting HMRC and Companies House

If you have any questions or concerns about late filing penalties or late payment penalties, you can contact the HMRC and Companies House directly. You can find their contact information on their respective websites. You may also contact the LFP finance team if you need assistance with payment.

Support Services for Compliance

Several support services are available to help businesses comply with HMRC and Companies House requirements. These services can help you avoid late filing penalties and late payment penalties.

One such service is the new company support service, which provides guidance and support to new businesses. This service can help you understand your obligations and avoid penalties.

Another service is email reminders, which can help you stay on top of your filing and payment deadlines. You can sign up for email reminders on the Companies House website.

In addition, Companies House offers a range of online tools and resources to help businesses comply with their requirements. These resources include webinars, guides, and FAQs.

Consequences of Persistent Non-Compliance

If you persistently fail to comply with Companies House and HMRC regulations, you will face serious consequences. In this section, we will explore the penalties and interest charges you may incur, as well as the risk of strike off and legal action.

Penalties and Interest Charges

If you fail to file your accounts or tax returns on time, you will be subject to penalties and interest charges. Late filing penalties are charged by Companies House, while late payment penalties are charged by HMRC. The penalties and interest charges can quickly add up, making it difficult to catch up with your obligations.

Late filing penalties issued by Companies House against limited companies can range from £150 to £1,500 per document, depending on how late the accounts are filed. If your accounts are more than six months late, you may face an additional penalty of 10% of your company’s turnover, up to a maximum of £7500.

Late payment penalties issued by HMRC can be up to 15% of the tax owed, depending on how late the payment is made. Interest is also charged on the amount of tax that is unpaid after the due date, and the rate is currently 2.6%.

Risk of Strike Off and Legal Action

If you continue to ignore your obligations, your company may be struck off the Companies House register. This means that your company will no longer exist, and its assets will be forfeited to the Crown. You may also face legal action from HMRC, which can result in fines, penalties, and even imprisonment.

It is important to take your obligations seriously and ensure that you comply with Companies House and HMRC regulations. Additionally, for businesses needing assistance with payment or compliance strategies, our accountancy services, including Tax Returns and Bookkeeping Services, offer comprehensive support.