HM Revenue and Customs (HMRC) can issue a wide variety of penalties to your business if tax-related matters are not handled correctly.

The best way to avoid these fines is to be made aware of them. Therefore, in this article we will look at the different types of penalty that can be incurred by your business for late filing or payment of tax returns. HMRC has the right to penalise your business if filing of payments is carried out past a set deadline.

Self-Assessment Tax Returns

For self-assessment tax returns, a £100 late filing penalty will be deducted from your account if the requested documents are sent up to 3 months beyond the threshold date. For late payments of the tax owed, you will be charged interest if you haven’t paid HMRC before the deadline.

PAYE Payment

If your business uses the Pay As You Earn (PAYE) system as part of the payroll of its employees, you must report the details of their pay in a Full Payment Submission (FPS) on a monthly basis (if you pay your employees each month). If this is sent to HMRC late, you will receive a monetary penalty unless there is valid reason for the late reporting. The penalty amount will vary depending on how many people are employed by your company and varies from £100 to £400.

VAT Returns

When it comes to VAT returns, if you pass the deadline you will have to pay a surcharge over and above the money you already owe to HMRC. Depending on how many times you have not sent your VAT return in a period of a year, the surcharge percentage can vary a lot. It can go as high as 15% if you have missed the deadline 6 or more times in the last 12 months, for example.

CIS Returns

If you are a Constructor Industry Scheme (CIS) contractor, you must file and send a monthly return to the taxpayer of payments to subcontractors. If this is done past the deadline, penalties will apply. They start at £100 for a day late and increase to £300 (or 5% of the money owed) if sent over 6 months late. If over a year has passed without paying the CIS return, you may end up having to pay a £3000 fine or 100% of the money owed, over and above the original return amount.

Corporation Tax

Most businesses have to pay corporation tax. This will be 1 or 2 times a year depending on when the business was founded. If you do not pay the full corporation tax amount on time, you will get a penalty from HMRC.

It starts at £100 for a 24-hour delay

Increasing to £200 for being 3 months late

10% of the tax owed at 6 months past the deadline

20% when over a year behind schedule

Furthermore, you will also be charged interest on the unpaid tax. This is currently set at 3.25% but is due to go up to 3.5% on 24th May 2022.

Capital Gains Tax

Capital gains tax, that is taxation on the sale of non-inventory assets such as property, must be paid within 60 days of the sale being completed. If tax returns on capital gains are not filed or paid on time, the penalties are much the same as that of self-assessment tax returns.