There was a time, not so very long ago, where HMRC didn’t issue fines and penalties as a matter of course, and in the rare occasion where one was issued, you could normally ring them up, say sorry guv it was an honest mistake, and they’d tell you to be a little more careful next time, now run along, sonny, there’s a good lad.
Fast forward ten, fifteen years and the average SME can’t turn around without running into another HMRC or Companies House fine. Granted, there are tools that make compliance that much easier now, but still it can be a challenge getting things in on time.
Here is a list the most frequently incurred penalties an SME can face:
Companies House
Private limited companies have, with a few exceptions, nine months from the financial year in which to file their accounts. Normally, that’s plenty time, but not always. If you file late. you can expect a hefty fine.
1 day to 1 month late £150
1 month to 3 months late £375
3 months to 6 months £750
More than 6 months £1,500
If you’re late two years’ running, the fine doubles. So, if you were one day late one year, and seven months late the next, you’d have a penalty of £3,000 to pay in the second year.
Corporation Tax
Late filing of corporation tax return
1 day to 3 months late £100
3 to 6 months late another £100
6 to 12 months late 10% of tax due
More than 12 months Another 10% of the tax due
If you can’t be bothered to do the maths (why would you when I can do it for you), that means that if you’re 7 months late and you had taxable profits of £50,000, then your penalty would be £1,150 plus interest.
Value Added Tax
Everyone know you don’t mess with the VAT man right? This aphorism has entered into SME lore, and for good reason. Ignoring for now the difficulties you can get into when you’re the subject of a VAT inspection, the penalties for late filing are eye-watering: If you’re late filing your return once, you get a slap on the wrist and are put into what’s not as a Surcharge Period which last for twelve months. If you’re late again in that surcharge period – and remember a VAT return is not complete unless you also pay the amount due in full, you will be charged as follows:
Default 2 2% of tax due
Default 3 5% of tax due
Default 4 10% of tax due
Default 5 and beyond 15% of tax due
PAYE
What you pay for late submission of your monthly or quarterly Full Payment Submission report depends on the number of employees you have:
1 to 9 employees £100
10 to 49 employees £200
50 to 249 employees £300
250 or more £400
Self Assessment
Everybody knows you’ve got to file your self assessment by 31st January but if you’re just one day late, there’s an automatic fine of £100. If you still haven’t filed 30 days after the 31 January, then the penalty is £10 per day.
These are the basic fines and penalties you can face for non-compliance. If you are unfortunate enough to be the subject of an investigation, then you face a whole new raft of challenges: Daily fines for failure to produce information and fines of up to 100% of any additional tax found due. But that’s another story for another day.
Be careful out there.
