In a way, HMRC expects very little of limited companies regarding Corporation Tax. All it asks is that as a director of the company, you comply with all tax laws, fill out your company tax return correctly, file it on time and pay up on time.
Sounds simple. But of course there are lots of different laws and conditions to comply with, and plenty of mistakes to be made.
The penalties for mistakes will certainly cost you time putting them right, and may cost you cash if HMRC fines your business.
Ultimately the company directors are responsible for the return, not the accountant. So while filling out a company tax return is best left to your accountant, you should be fully aware of the common mistakes made:
The tax return is not completed properly
This is one of the most common reasons why HMRC will query your Corporation Tax return. Although your accountant is most likely to complete the form on your behalf, the company’s directors are ultimately responsible for the accuracy of the company’s accounts.
You submit your return late
When your business gets a notice to deliver a company tax return, it will have an issue date on the front, and an accounting period. This is typically 12 months long and will be your financial year, for example, 1st May 2019 to 30th April 2020.
The tax return is due back to HMRC on the later of these two dates: either the first anniversary of the last day of the period (in this case that would be 30th April 2021); or the end of three months following the date the notice to submit a tax return was issued.
This means you always have at least three months to get your company tax return sorted, from the moment you get a notice. However, don’t leave it till two weeks before! Unlike personal tax returns which can be thrown together fairly quickly (especially if you are an employee), company tax returns take a little longer.
As well as penalties for late payment of Corporation Tax, if your calculations are incorrect, HMRC can apply a penalty of 30% to 100% of the potential lost revenue, depending on whether the mistake was deemed to be deliberate or not. Find out more here.
Company tax returns must now be submitted online to HMRC and payment must be made electronically.
You miscalculate the tax due
There are so many rules and laws affecting tax that it really is inefficient and possibly even foolhardy to attempt your company tax return yourself. A qualified accountant will work out all the figures and ensure the forms are filled out and filed correctly.
You make a late payment
Bizarrely, payment of tax can be due BEFORE the tax return is. HMRC requires all companies to pay any outstanding tax no later than nine months and one day after the end of the accounting period.
In the example above, that would be 1st February 2021. You will have to pay interest on any tax paid late.
Large companies – generally those making £1.5m or more a year in profit – are required to pay instalments through the year.
What to do if you realise you have made a mistake
You can go back and change a company tax return within 12 months of the statutory filing date – the date we talked about earlier. You will need to write to HMRC with details of the changes, complete with a declaration that the information is correct and complete to the best of your knowledge. Again, your accountant will advise on the best course of action.
If HMRC spots a mistake in your return, it can amend it any time up to nine months from the day you delivered it. If you make an amendment, you give them another nine months to make corrections.
It’s believed that HMRC will make no judgement on the accuracy of figures, but will correct obvious errors, omissions, errors of principle or mistakes adding up. You can’t appeal against their corrections, but can amend your return to remove them.
Remember to get professional advice from a qualified person before taking any action. Don’t rely purely on information contained in this article.
Last updated - 6th October, 2017