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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.


Making Tax Digital – First phase introduced in April 2019.

Making Tax Digital for Norfolk

HMRC has announced its plans to “Make Tax Digital”, and the first phase of the process will be introduced in April 2019

What does ‘Making Tax Digital’ mean?

Tax returns, including VAT returns are currently completed and filed online, and this project is hailed as the next step to make UK individual and business tax even more digital, and automated. HMRC will require businesses to use functional compatible software, such as cloud accounting software like Xero, Sage and QuickBooks to report income and expenses in as near real-time, as possible.

As at May 2018 HMRC confirms that small businesses can use spreadsheets to record tax information, but you will need bridging software to upload it and be linked digitally to HMRC.

VAT filing from April 2019

The first tax to be using the MTD process will be VAT, with companies, sole traders, partnerships etc. that meet the VAT threshold of £85,000 being required to submit their VAT returns digitally from April 2019. There will be a “soft landing” period of 12 months where no financial penalties will be issued as we all get used to complying with the changes.

Only accounting and bookkeeping software that is HMRC approved and on their list should be used and all the big names are expected to modify their software to comply with HMRC IT requirements.

Under the new digital tax regime businesses will be required to keep a digital record of all their sales broken down by the VAT liability they attract (zero-rated, standard-rated etc.). They will also have to break down the purchases they make by VAT and retain information about the adjustments made for reverse charges on imported services, car leasing and business entertainment.

There is currently no mandatory requirement to use bookkeeping scanning software but this may change in future. Most good cloud accounting systems have this functionality and when it comes to VAT returns having a scan of invoices to hand is a positive for business efficiency.

MTD for Business

Potential Impact of MTD for Business

  • Software – If you don’t use functional compatible software you may choose to change from spreadsheets Xero, Sage Cloud or QBO and pay the monthly subscription for these.
  • More efficient businesses – It is expected that productivity will improve as all kinds of business owners make the move to online, digital accounting software with live bank feeds.

Are you ready for Making Tax Digital?

At Shaper Accountants we are helping businesses get ready for the new tax reporting requirements so if you have questions or need help please get in touch.

You can find out more information here.




Powerful new App launched by Shaper Accountants

It’s landed!

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The Brand new App from Shaper Accountants

We are constantly looking for ways we can improve the service we offer our clients and friends, and we are proud to announce the launch of our brand new Shaper App.  It’s completely free of charge to download and it’s available for iPhone, iPads and Android phones and devices.

So the next time you need to look up a tax rate or work out a VAT calculation, our new App can help.  It provides you with up to date, important accountancy data at your fingertips.


Photo Receipt Management, Email and Store

Never lose a receipt again! Using the latest app you can track receipts and expenses literally at the touch of a button. With minimal effort you can take a picture of any receipt and save it to your App. Any additional information can be added later and receipts stored by amount, category, and date.

It can help you track all your expenses with ease and enable us to interact electronically with you.

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If we do your bookkeeping for you and you use Receipt Bank, you can access that too from the Shaper App too.

GPS Mileage Tracking and Management tool | iOS only

When it comes to mileage half the battle is keeping an accurate tab on your journeys. Using the built-in GPS in your device, it will automatically help you to track mileage helping you to record every single trip at the touch of a button. Plus it also manages trips as well, storing them and allowing them to view, edit or email with complete ease.

Micro Business - Accounts and Tax

Keeping in touch

We are committed to finding ways to communicate and interact with clients in the most efficient possible way.  The new App enables us to send push notifications to all App users.  We will be using this feature to share with you important news, deadline reminders and financial updates.

It’s available for iPhone, iPad and Android devices and it’s available free of charge today. Click on the App store, search for Shaper Accountants and download our handy little App that will make life much easier for you.


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QR Code - Shaper App