What are the Deadlines for Corporation Tax Instalments?

What are the deadlines for corporation tax instalments? One key aspect of tax compliance is meeting the deadlines for corporation tax instalments, which can be a complex and daunting process. Corporation tax instalments allow businesses to pay their tax bill in stages, rather than all at once.

In this discussion, we will delve into corporation tax instalments, exploring the deadlines, consequences of late payment, and exceptional circumstances. Be equipped to manage your business’s tax payments with confidence.

 

 

What are Corporate Tax Instalments?

Corporation tax instalment payments are a way for businesses in the UK to pay their corporation tax bill in stages, rather than all at once. Companies that are required to make instalment payments are those with a corporation tax liability. This includes large businesses, multinational corporations, and some smaller companies with complex tax affairs.

Instalment payments are calculated based on the company’s previous year’s tax liability or an estimate of the current year’s tax liability. The payment amount is then divided into four equal instalments, due every quarter. Instalment payments are due on the 14th day of the month following the end of each quarter. For example, the first instalment payment for the quarter ending June 30th would be due on July 14th.

If a company fails to make an instalment payment, HMRC may charge interest on the late payment and issue penalties. It’s essential to communicate with HMRC if payment difficulties arise. Making instalment payments helps businesses manage their cash flow. This will avoid large tax bills, and reduce the risk of penalties and interest charges. It also allows companies to budget and plan for their tax liability throughout the year.

What are the Deadlines for Corporation Tax Instalments?

Meeting deadlines for corporation tax instalment payments is crucial to avoid penalties and fines.

Quarterly Instalment Payment Deadlines

1. First quarter (April-June): Payment due by July 14th
2. Second quarter (July-September): Payment due by October 14th
3. Third quarter (October-December): Payment due by January 14th
4. Fourth quarter (January-March): Payment due by April 14th

Annual Payment Deadline

1. 9 months and 1 day after the end of the accounting period: Final payment due for the entire tax year

Important Notes

1. If the deadline falls on a weekend or bank holiday, the payment is due on the next working day
2. Payments must be made electronically, such as through online banking or BACS
3. Ensure accurate payment references to avoid delays or errors

Penalties for Late Payments of Corporation Tax Instalments in the UK

Missing deadlines for corporation tax instalment payments can result in penalties and interest charges, adding to the financial burden on businesses.

Initial Penalty

1. 1% of the unpaid tax due for the quarter
2. Applied on the day after the payment deadline

Daily Interest Charges

1. Accrues on the outstanding amount, including penalties
2. Calculated from the payment deadline to the date of payment

Further Penalties for Persistent Late Payment

1. 1.5% of the unpaid tax due for the quarter, if payment is still outstanding after 3 months
2. 2.5% of the unpaid tax due for the quarter, if payment is still outstanding after 6 months

Additional Penalties for Serious Non-Compliance

1. Up to 100% of the unpaid tax is due, to cases of deliberate or careless behaviour

Penalty Appeals

1. Businesses can appeal against penalties if they have a reasonable excuse for late payment
2. Must provide evidence to support the appeal

Interest Charges on Penalties

1. Interest accrues on penalty amounts, as well as the original tax due
2. Adds to the overall cost of late payment

Exceptional Circumstances for Corporation Tax Instalment Payments in the UK

In certain situations, businesses may be unable to meet their corporation tax instalment payment deadlines. HMRC recognises exceptional circumstances that may warrant relief from penalties and interest charges.

What Constitutes Exceptional Circumstances?

1. Serious illness or death of a key person, such as a director or accountant
2. Unforeseen business disruptions, like fire or flood damage
3. IT system failures or software issues
4. Bankruptcy or liquidation

Here is how to claim relief for exceptional circumstances.

1. Notify HMRC in writing, explaining the circumstances and providing evidence
2. Submit a claim for relief within a reasonable timeframe
3. Cooperate with HMRC’s investigation and provide additional information as needed

Consequences of Failing to Claim Relief

1. Penalties and interest charges may still apply if relief is not claimed
2. Potential impact on credit rating and cash flow

Types of Relief Available

1. Suspension of penalties and interest charges
2. Reduction or waiver of penalties
3. Extension of payment deadlines

HMRC’s Discretion

1. HMRC considers each case on its merits
2. Relief is not automatic and may be subject to conditions

 

 

The Bottom Line

In conclusion, understanding the deadlines for corporation tax instalments is crucial for businesses to avoid penalties, interest charges, and reputational damage. By recognising the quarterly instalment payment deadlines and the annual payment deadline. Including penalties and interest charges, and knowing how to claim relief in exceptional circumstances.

By prioritising timely payments and maintaining open communication with HMRC, businesses can ensure a smooth financial operation and focus on growth and success. Remember, corporation tax instalment payments are critical to tax compliance, and meeting deadlines is key to avoiding unnecessary costs and stress. By staying informed and proactive, businesses in the UK can navigate the corporation tax instalment payment system with confidence.