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Deadlines are a fact of business life, and most businesses will be to some extent deadline-driven. Apart from any deadlines imposed by customers or suppliers, businesses also need to be mindful of filing and other legislative requirements.

Limited companies and limited liability partnerships are required to file accounts at Companies House. For accounting periods starting on or after 6 April 2008, private companies have nine months from the year end in which to file accounts with the Registrar. Public companies have six months. Increased late filing penalties have applied from 1 February 2009, so that a private company filing accounts up to one month late will face a penalty of £150. If accounts are filed late in two consecutive years, the amount of the penalty doubles.

From 1 October 2009, there is no longer a 14 day ‘period of grace’ if accounts are rejected by Companies House. So, if a company files very close to the filing deadline date, and those accounts are rejected, the same deadline will still stand, that is to say nine months from the period end. If the amended accounts are not filed by that date, the penalty will be due.

Companies House deadlines are very simple in comparison to the far more complex position with HMRC. In relation to tax, there are filing deadlines, payment deadlines and also deadlines in relation to notifications. The deadlines vary from tax to tax, and the penalties can quickly start to accumulate if a return is filed late, or a payment is not made on time.

There are three key dates in relation to filing self assessment income tax returns. Paper returns have to be filed by 31 October, while online filing has to be done by 31 January following the year of assessment. If any tax due is to be recovered via an amended notice of coding, the return has to be filed by 30 December.

Corporation tax returns have to be filed within 12 months of the end of the accounting period, and P11Ds by 6 July each year. P35s have to be submitted by 19 May each year. The concession (ESC B46) allowing an extra seven days (in effect extending the deadline to 26 May) was withdrawn from 31 March 2011. This withdrawal is because all P35s now have to be filed online (since 6 April 2011), and the concession was to allow for delays in the post. 

Conversely paper VAT returns have to be filed by the end of the month after the return date, while online filers are given an extra seven days. The VAT return filing deadline is extended to two months for tax payers using the annual accounting scheme, but online filers do not get an extra seven days.

Miscellaneous deadlines
Businesses also need to be aware of a few other miscellaneous deadlines:

• requirement to notify chargeability: 5 October, i.e. six months from the end of the tax year in which the liability arises
• complete and file form CT41G within three months of a new company starting business activity
• VAT registration is compulsory if at the end of any given month, taxable supplies for the last 12 months exceed £70,000, or you expect them to exceed £70,000 in the next 30 days
• tax credit claim renewal: 31 July.

With potentially even more of an impact on businesses than the filing deadlines, it is essential to ensure that tax payment deadlines are also met. Prior to self assessment, a criticism often levelled at HMRC was that the time lapse between earnings and the paying of the associated tax, meant that self employed people might experience cash flow difficulties. Under self assessment, the first payment on account is due on 31 January in the tax year. This will be an estimate, based on the previous year’s tax liability. The second payment on account is due on 31 July following the end of the tax year, and any remaining balance is due the following 31 January.

Corporation tax due should be paid nine months and one day after the end of the accounting period, if the company has profits below £1.5m. Larger companies have to pay their tax in quarterly instalments.

PAYE and class 1 NIC, if paid electronically, are due by the 22nd of each month, or by the 19th if a postal payment. Class 1A NIC is due by 22 July if paid electronically, but by 19 July if the payment is by post.

From 1 April 2010, VAT paid by cheque was only treated as cleared once the cheque had cleared in the HMRC bank account. The payment due date is one month after the return date, but this is extended by seven days if the payment is made electronically.

The result of any missed deadline is usually a penalty. If a self assessment income tax return is filed late, there is a £100 penalty. This is currently capped to the amount of the tax liability, but the cap will disappear for the tax year 2010/11. Thus, even if a repayment is due to the tax payer, a penalty of £100 will be levied if the return is filed late. If it is a partnership return, the penalty will be £100 per partner.

If the tax due by 31 January is not paid by that date, interest will be charged. If the tax is still outstanding at the end of February, a 5% surcharge will also be charged, and an additional 5% if it is still outstanding on 31 July.

The penalties for P35s and P11Ds filed late can quickly build up to a substantial amount. In both cases the penalty is £100 per 50 employees per month or part month. However in both cases the first notice about the penalty will be sent out four months after the deadline, meaning that the penalty could easily reach £400 before the employer realises that a return should have been filed.

From May 2010, penalties for late paid PAYE have changed. The amount of the penalty will vary depending on how many times in the tax year the payment was late, ranging from 1% if there were 2-4 late payments in the year to 4% if there were 11 or 12 late payments. An additional 5% will be levied if a payment remains outstanding for six months, and a further 5% after twelve months.

In common with income tax returns, corporation tax returns will attract a £100 penalty for late filing, but with a further £100 charged if the return is still outstanding after three months. If late filing occurs for three consecutive periods, the £100 fine is increased to £500. 10% of any unpaid corporation tax will be levied as a penalty if the return is filed between 18 and 24 months late, with a further 10% becoming due if the return is more than 24 months late.

Interest will be charged on any late paid corporation tax. Though the good news is that this interest is tax deductible!

Penalties for inaccurate returns are applied as a percentage of the extra tax due when the error is rectified. The percentage will vary from 0-15% for unprompted careless errors, to 50-100% for prompted deliberate concealed errors. Errors are all either prompted or unprompted, and then within those two categories will be classed as ‘careless’, ‘deliberate but not concealed’ or ‘deliberate and concealed’.

From 1 April 2010, these percentages will also be applied to potential lost revenue arising when a company does not inform HMRC that it is liable for corporation tax. HMRC can also charge a penalty of £3000 if a company does not keep proper records, though this will usually only be charged in serious cases.

Late paid VAT penalty percentages also vary depending on whether the default is careless or deliberate, concealed or not and the disclosure is prompted or unprompted. If a taxpayer defaults in the filing of returns, a 12 month default period is triggered, and further defaults within that period will result in a higher penalty. The penalty will range from nothing for the first default, up to 15% for the sixth and subsequent defaults in a surcharge period.

As part of the changes brought in by the 2008 Budget, HMRC introduced a standard limit of four years from the end of the tax year for making claims for repayments of tax. This type of claim usually arises when a taxpayer is entitled to a specific relief that they have not previously claimed.

HMRC also introduced a limit of four years for the department to issue tax assessments (except where a loss of tax has resulted from carelessness or has been done deliberately). The previous limit for claims and assessments for income tax and capital gains tax was five years from the 31 January immediately following the tax year.

For self assessment taxpayers, the new time limits took effect on 1 April 2010.  For individuals outside the self assessment regime, the new time limits for repayment claims take effect on 1 April 2012. This includes people who pay income tax on their earnings through the PAYE system via their employer, or people whose income is below the tax threshold and who therefore do not pay tax.

Taxpayers can appeal against HMRC penalties if they have a ‘reasonable excuse’. HMRC’s interpretation of ‘reasonable excuse’ has been scrutinised and challenged recently in court, but that is another story…

For the latest on reasonable excuse click here.

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