Paying Companies House and HMRC penalties

companies HOUSE and HMRC penalties

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    Every country has a statutory framework that sets boundaries as to how businesses function. There are obligations to be fulfilled, and any default usually leads to monetary and non-monetary penalties.

    The United Kingdom also has a pre-defined framework for managing the companies. The article below will help gain insights into understanding and paying by the Companies House and HMRC penalties.

    The topics discussed in the article are:

    What are Companies House penalties?

    The government introduced Companies House penalties in 1992 to ensure that directors file their accounts and reports on time.

    All private companies must submit their annual accounts with Companies House within 9 months from financial year-end. Different timelines apply for the public limited companies and the first year of incorporation.

    Financial reporting is essential for all stakeholders. Such information is available freely in the public record. The Companies House maintains the list of all limited companies in the United Kingdom. You can access it at no cost here.

    The sole aim is to encourage timely filling and achieve a zero penalty revenue generation ecosystem.

    A director or key managerial personnel at LLP is directly responsible for submission for accounts within the due date in the correct format.

    Here is the year-end checklist : How to close your small business books?

    Penalty amount

    The penalties are linked to when you file your accounts- the later the accounts are filed, the higher the penalty amount. The rates are different for public and private companies.

    DurationPenalty for Private/ LLP CompanyPenalty for Public Company
    Late less than 1 month£150  £750  
    Late 1 month to 3 months£ 375  £1,500  
    Late 3 months to 6 months£750  £3,000  
    Late more than 6 months£1,500  £7,500

    The critical point here is that the penalty will double for late filings for two successive financial years consecutively.

    Here is an example:

    For instance, a private company has an accounting period ending on 30 June 2021. Since we are specifically not talking about first accounts, we would use nine months—the deadline for filing annual statutory accounts 31 March 2022.

    If submissions are late by 2 days which is 2 April 2022, the penalty will be £150. The amount will double next year if again there is late submission of accounts.

    What are the consequences of not filing?

    It is a criminal office not to file accounts with the Companies House. The directors and the designated members can be personally liable for this default.

    The entire set of criminal proceedings can be initiated against the company by the Companies House.

    There is no offence in late submission, but the registrar can take steps to punish the company.

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    How to avoid a penalty?

    The central question that pops up is that how to avoid the penalty?

    The solution is to be vigilant and aware concerning all statutory timelines. Other steps that to avoid penalty are:

    • If submitting a paper version, allow enough time for reports to reach the Companies House within the deadline.
    • Mark your deadlines on email/calendar reminder.
    • Instruct accountants to stay in sync with the time limit.
    • In case of any doubts, check the Companies House service to know about the due date.

    Check Our : top tips for meeting your accounting deadlines effectively

    How are accounts delivered?

    Accounts can be filed online or via post.

    You can submit your company accounts to the Companies House credentials via the web filing portal.

    However, if you have an accountant, then you don’t need to worry about this. They will file the accounts with the Companies House.

    company house

    Can the deadlines be extended?

    It is imperative to submit the accounts on time, but the reports can be filed late if there is a specific reason. The company within the deadline can apply for more time in the manner described below:

    • The company unable to send its reports due to certain uncontrollable external factors can apply for an extension.
    • Covid 19 is one factor where the government granted automatic extensions under the Corporate Insolvency and Governance Act.

    Can you pay the penalty in instalments?

    If you run into financial hardship or personal difficulty and cannot pay the penalties amount, there is help available. HMRC has time to pay arrangements.

    You can agree with HMRC a bespoke payment plan. HMRC usually undertakes an “income and expenditure assessment” to understand how much you can afford. You can find out more here.

    Appealing against penalty

    The companies also have a legal right to appeal against the penalty under exceptional circumstances. The possible reasons for rejection include:

    • Your company is dormant
    • You cannot afford to pay
    • Directors have financial difficulties
    • Accounts are delayed
    • You did not know when to file
    • You did not know how to file

    COVID -19 penalty guidelines

    The pandemic has made certain temporary adjustments in the filling requirements. Therefore, the Companies Regulations 2020, in sync with Corporate Insolvency and Governance Act, decided to ease the filing deadlines for the last year 2020.

    Deadline between 27 June 2020 & 5 April 202112 months: Private Company 09 months: Public Company

    From 6 April 2021, companies have to file within the usual deadlines. Filing timelines are extended for the following:

    • Confirmation Statement
    • Details of company events
    • Details of Mortgage Charge

    The three-month extension in the pandemic ensures that businesses do not suffer in this sensitive period. You can appeal late filing penalties online. The details disclosed are:

    • Company number
    • Online filling authentication code
    • Company’s penalty reference
    • The reason for the request

    Registrar’s discretion

    The registrar has the discretion not to levy any penalty when a company submits its accounts late. The act only mentions the registrar discretion to collect the penalty. This discretion is also valid in certain exceptional circumstances where the Companies House stands responsible for late filing.

    HMRC penalties

    HM Revenue and Customs also follow a systematic arrangement to collect tax. People and businesses having other income must report it in a tax return to the department.

    Self-assessment

    For self-assessment, the tax return must be submitted if you are:

    • A self-employed as a sole trader and have an income of more than £1,000
    • A partner in a business partnership

    Check our detailed Guide on: who is required to complete a self-assessment tax return.

    The concerned people can submit the self-assessment return by 31 January every year if submitting online or 31 October by paper.

    You may find our Guide to submitting a Self Assessment Tax Return useful.

    Penalties are payable for late filing and late payment of tax due.

    Self-assessment penalties

    The two possibilities set of self-assessment penalties are:

    • Late filing
    • Late tax payment

    Penalties in case of non-payment of due tax are:

    • Payment late by 30 days- 5% of the tax due
    • Payment late by six months- 5% of the tax due at that date
    • 12 months and later- 5% of the tax unpaid at that date

    Corporate Tax Penalty

    Companies must pay the penalty if they don’t meet filing deadlines for the corporate tax return (form CT600). Directors are responsible for meeting the payment and submission deadlines.

    • Corporation tax is payable within nine months and one day after your accounting period ends
    • The Corporate tax return (CT600) filing deadline is within 12 months after the accounting period ends

    The penalties in case of default are as follows:

    Time after deadlinePenalty
    1 day£100  
    3 monthsAnother £100  
    6 months10% of the estimated unpaid tax  
    12 monthsAnother 10% of any unpaid tax  

    The £100 penalties are increased to £500 if the tax return is late three times consistently.

    VAT penalties

    Businesses registered for VAT are subject to the penalty framework of HMRC.

    The default is recorded when:

    • You do not submit a VAT return on time.
    • You do not pay full payment for VAT by the timeline.

    VAT payment deadline is usually within one month and seven days following the VAT quarter-end.

    HMRC imposes surcharge limits on businesses to create a strict framework. A 12-month surcharge period is applicable in default, further extended by 12 months at the next run.

    The surcharge is not payable

    • if you pay your VAT fully
    • have no tax to pay
    • you are due a VAT refund

    It is a percentage of VAT that stands outstanding at the time of default. The rate, however, increases every time default happens.

    The surcharge rates are:

    Defaults in 12 monthsAnnual Turnover less than £150,000  Annual Turnover more  than £150,000  
    1stNone  None
    2nd  None2% (Nothing if less than £400)  
    3rd  2% (Nothing if less than £400)  5% (Nothing if less than £400)  
    4th5% (Nothing if less than £400)  10% or £30 (whichever is more)
    5th  10% or £30 (whichever is greater)  15% or £30 (whichever is greater)
    6th or more15% or £30 (whichever is greater)  15% or £30 (whichever is greater)

    The rates keep on increasing consecutively. HMRC can also charge a penalty up to:

    • 100% of the tax due if there is a careless or deliberate inaccuracy
    • £400 if you submit a paper VAT return, unless you are exempt for online submission or MTD and
    • 30% of assessment sent by HMRC if you think it is low, and you do not tell HMRC about it within 30 days.

    How to pay Companies House penalties

    You can pay the Companies House penalties through three modes:

    Paying online, telephone banking or BACS  Commonly known as bank transfer, it takes three working days for the payment to reach. Companies House sort code, account number and account name, are used.  

    Sort code: 60-70-80
    Account number: 10031154
    Account name: CHSE LFP BACS ACC

    You will need Companies House swift code, account number, and account name for transfers from an overseas bank account.

    Swift code: NW BK GB 2L
    Account number (IBAN): GB34NWBK52210741005309
    Account name: Late filing penalties receipts  
    Credit / Debit Card  The easiest and accessible mode is through cards. All you need is the company number, reference number on the notice and a Company House account.  
    Cheque  The cheque is payable to Companies House. It must accompany remittance advice- a slip attached to a penalty notice.  

    Don’t forget to write the company name and number on the back of the cheque.  

    The cheque is sent through post to the Companies House at the following address.  

    Companies House
    PO Box 710
    Crown Way
    CF14 3UZ  

    How to pay HMRC penalties

    You can pay the Companies House penalties through three modes:

    Paying online, telephone banking or BACS  Commonly known as bank transfer, it takes three working days for the payment to reach. HMRC sort code, account number and account name are used.  

    Sort code: 08 32 10
    Account number: 12001020
    Account name: HMRC Shipley

    You will need HMRC swift code (also known as BIC code), account number (IBAN), and account name for transfers from an overseas bank account.

    Swift code (BIC): BARCGB22
    Account number (IBAN): GB03 BARC 2011 4783 9776 92
    Account name: HMRC Shipley  
    Pay online by Direct Debit  You can set up a direct debit from your HMRC online services account.  

    This way, any outstanding penalties will be debited directly from your bank account.  
    Credit / Debit Card  The easiest and accessible mode is through corporate or personal debit or credit card. Click here to make the payment.  

    Corporate debit/ credit cards carry a processing fee, whereas the payments from a personal card are free.  

    HMRC has said that it will accept payment on the date you make it, not the date it reaches their account.  
    Cheque  The cheque is payable to ‘HM Revenue and Customs’. It must accompany remittance advice- a slip attached to a penalty notice.  

    Don’t forget to write your 14 or 15 character payment reference on the back of the cheque.

    You’ll find the payment reference on the payslip attached to your Notice to Pay.

    If you do not have a payslip, then include the following details:

    ⦿ Your name, address and telephone number
    ⦿ payment reference. It usually begins with X
    ⦿ period that you are paying
    ⦿ an amount

    The cheque is sent through post to the HMRC at the following address.

    HMRC
    Direct
    BX5 5BD

    Final thoughts

    Financial penalties have an objective to enable transparent financial mechanisms across businesses.

    To avoid penalties, every company, LLP, an individual or sole trader must file returns and pay the taxes on time.

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