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Tax penalties for limited companies and how to avoid them

Tax penalties for limited companies and how to avoid them
Essential tax compliance for limited companies

Tax penalties for limited companies and how to avoid them

Penalties for late payment

Late payments of taxes incur interest charges at a rate of 7.75%. This applies to various taxes, including corporation tax and income tax. So it’s worth avoiding, not least because of the dent in your cash. No one wants a penalty so let’s help you get it right!

A little note – All companies, including dormant and non-trading entities, are required to submit a confirmation statement at least once a year. This ensures the accuracy of the information that HMRC and Companies House have on record for your company is correct.

Although there is no penalty for late filing, it is mandatory to submit a confirmation statement even if there have been no changes to your company during the review period.

Additionally, you must declare that the planned future activities of the company are lawful. This requirement is applicable to all confirmation statements dated 5 March 2024 onwards.


Top Tips to avoid penalties.

Avoiding penalties and ensuring compliance is not just about adhering to deadlines; it involves strategic planning and best practices. Here’s a few top tips:

  1. Accurate record-keeping

Maintaining detailed and accurate financial records is more than a procedural task – it is the backbone of financial responsibility and regulatory compliance for any entity. This record-keeping ensures that financial statements and tax returns are prepared with precision, minimising the risk of inaccuracies that could potentially result in penalties or HMRC compliance enquiries.

  1. Never underestimate the importance of a good bookkeeper

Good attention to financial documentation offers invaluable insights into the business’s financial health, enabling informed decision-making. It also simplifies the process of identifying and putting right discrepancies early.

Get a good bookkeeper and make sure they are licensed and regulated for Anti-Money Laundering – it’s the law, so don’t use an unregistered bookkeeper. If you directly employ a bookkeeper make sure they are trained. Your bookkeeper will know your deadlines and compliance obligations.

  1. Save cash for tax obligations!

Setting aside funds for tax liabilities as they accrue throughout the financial year is a good idea and a must. This methodical approach eliminates the last-minute rush to gather sufficient funds for tax payments, thereby reducing stress and the risk of incurring penalties for late payments.

Additionally, by allocating funds for taxes in advance, individuals and businesses can improve their cashflow management, allowing for a more stable financial outlook.

  1. Use accounting technology – Digital First

The Making Tax Digital (MTD) initiative by HMRC represents a transformative approach to tax filing, mandating a digital-first approach.

Bookkeeping software solutions such as QuickBooks, Xero and Sage are designed to integrate seamlessly with HMRC’s systems, automating the submission of VAT and PAYE returns directly from the software.  Digital accounting helps businesses adhere to regulatory requirements while enhancing their operational efficiency and financial transparency. It will bring peace of mind and you accountants can access your software remotely, saving time and  making your like easier.

  1. Addressing penalties

When companies face penalties for late tax filings or payments, the option to appeal provides a recourse if they can present a valid reason for the delay, such as severe illness or unexpected technical disruptions. But be aware a good accountant will apply for a filing extension if you let them know about illness, bereavement or real technology issues.

Successful appeals hinge on the ability to conclusively demonstrate that the company took all reasonable steps to meet its tax obligations, despite the challenges faced.

Get help

Regular conversations with your accountant are often really helpful for maintaining compliance. Seeking professional help not only facilitates adherence to statutory deadlines but can also enhance your operational efficiency and financial health.

If you need help get in touch with us.


Tax deadlines – Essential tax compliance for limited companies

tax compliance for limited companies
Essential tax compliance for limited companies

Managing a limited company requires meticulous attention to regulatory obligations, particularly with regard to tax and accounting. Financial compliance is a series of key deadlines and potential penalties for non-compliance, demanding a proactive and informed approach from company directors.

Here are some of the key deadline you’ll come across as a Director;

Initial setup

 Filing the first accounts with Companies House

The journey of compliance begins shortly after the incorporation of your company. Your first significant deadline is the submission of your initial set of accounts to Companies House, due 21 months from the date of registration.

This extended deadline for the first submission recognises the challenges new businesses face in establishing their operations and sets the stage for regular annual reporting thereafter.

Annual obligations

  •  Annual accounts submission

After the initial submission, your company is required to file annual accounts within nine months following the end of its financial year. These accounts must provide a transparent overview of the company’s financial performance and position, including the profit and loss statement, balance sheet, director’s report and, depending on the company’s size, an auditor’s report.

This documentation ensures stakeholders, including shareholders, creditors and regulatory bodies, have access to accurate information about the company’s financial health.

  • Corporation tax obligations

Parallel to filing annual accounts is the obligation to address corporation tax. Companies must calculate and pay this tax nine months and one day after the conclusion of their financial year. Importantly, this responsibility includes informing HMRC if the company believes it is not liable for any corporation tax, thus avoiding penalties for presumed non-payment.

  • Company tax return

A critical component of tax compliance is the filing of the company tax return with HMRC, which is due 12 months after the end of the accounting period for corporation tax.

This return is comprehensive, detailing the company’s tax liability based on its annual financial report and calculations. It’s a fundamental process for declaring tax obligations to HMRC and requires precision and thoroughness.

Understanding some of the penalties for non-compliance

 Penalties for late filing

The consequences of missing filing deadlines are significant and tiered based on the delay.

For corporation tax, the following applies:

  • 1 day late: £100
  • 3 months: Another £100
  • 6 months: HMRC will estimate your Corporation Tax bill and add a penalty of 10% the unpaid tax
  • 12 months: Another 10% of any unpaid tax

For statutory accounts with Companies House, the following applies:

  • Not more than 1 month: £150 for a private company or LLP (£750 for a public company)
  • More than 1 month but not more than 3 months: £375 for a private company or LLP (£1,500 for a public company)
  • More than 3 months but not more than 6 months: £750 for a private company or LLP (£3,000 for a public company)
  • More than 6 months: £1,500 for a private company or LLP (£7,500 for a public company)

Make sure you and your bookkeeping staff know your key dates and deadlines.