Corporation tax payment deadline
Each year limited companies are required to pay corporation tax to HMRC on their profits and file a company tax return (CT600).
It’s important to check when your corporation tax is due as late payment can lead to penalties from HMRC.
When is your corporation tax due?
The corporation tax payment deadline for your company will depend on:
- When the company’s accounting period ends and
- How much its taxable profits are for that accounting period.
Check your accounting period
The date you need to pay by depends on your company’s corporation tax accounting period.
Your accounting period is usually the same as your financial year.
When a company is initially registered, it will be assigned a date for its end of financial year. If the company started trading on the day it was set up, this would usually be the last day of the calendar month when the company was incorporated. This is known as the ‘accounting reference date’ (ARD).
This means the accounting period usually begins on the date a company starts trading.
For example, if the company was incorporated on 8 May 2019, its end of financial year would be 31 May.
Level of taxable profits
If you have calculated taxable profits of up to £1.5 million in the relevant accounting period, corporation tax payment is due 9 months and 1 day after the end of the previous financial year accounting period.
For example, if the company’s accounting period ends on 31 March, the corporation tax payment deadline will be the following 1 January, ie 9 months and 1 day later.
Companies that have shown a loss and as such have no corporation tax due still need to declare this with HMRC by filing a completed return on time.
If the taxable profits are more than £1.5 million, corporation tax is paid in instalments.
Where company profits are between £1.5 million and £20 million, and where the accounting periods are 12 months, you would normally pay corporation tax in four quarterly instalments. Two of these instalments will be payable before the end of the relevant accounting period.
Corporation tax for larger companies is a complex area and professional advice should be sought to understand how your liabilities are calculated and which payment deadlines apply in your circumstances in light of the latest rules.
Filing the tax return
The company tax return is due 12 months after the relevant ARD. This means the deadline to file the company tax return is generally later than the payment deadline, and corporation tax must be paid first.
However, you will need to prepare the company tax return in order to calculate how much corporation tax is payable.
How you file your return in the company’s first year of trading is likely to be different to the usual rules.
In most cases, it will be necessary to file two tax returns in respect of two accounting periods and two corporation tax payments for the year the company was set up.
This is because an accounting period can’t be longer than 12 months, so you need to account for two different periods tp allow you to regularise the accounting periods for successive years.
This means you will need to file one return covering the first 12 months of trade, and then a second return to take you to the end of that calendar month.
For example, a first-year business set up on 21 October 2019 files accounts for the period 21 October 2019 to 20 October 2020, and files a separate report for 21 October 2020 to 31 October 2020. From then on, its accounting period will run 1 November to 31 October the following year.
The filing deadline for first-year accounts is 21 months after the company incorporation date.
After the first year, annual accounts have to be filed within nine months of the accounting reference date.
Paying corporation tax early
It may be beneficial to pay your corporation tax early.
If you have the funds available, it can be a job off your list of things to do.
Not only does it take the pressure off by knowing you have met your duty, HMRC should pay capital interest if you make the payment within the period six months and 13 days after the start of your accounting period.
Interest is then accrued from the date the tax is paid to the actual deadline. Capital interest on corporation tax payments is currently set at a rate of 0.5%.
As an example, for an accounting period starting 1 June 2019, and ending 31 May 2020, corporation tax paid between 13 December 2019 and 1 March 2021 would be due interest at 0.5%.
It’s important to remember that this approach would be based on an estimate of your corporation tax liability, and you may then need to notify HMRC as soon as possible if your final calculation is different to the amount you paid.
Also note that the interest is taxable and should also be included in the tax return.
Paying corporation tax late
If you pay your corporation tax late and miss the filing deadline for your return, you can face financial penalties from HMRC and Companies House.
How much financial penalty you incur will be determined by how late the payment is.
|Filing date after deadline||HMRC penalty|
|1 day late||£100|
|3 months late||Another £100|
|6 months late||HMRC will estimate the company’s corporation tax liability and add 10% to the unpaid bill|
|12 months late||Further 10% of unpaid tax|
If a company is late with its tax returns three times in a row, HMRC will increase the £100 penalties to £500 each.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal, tax or financial advice, nor is it a complete or authoritative statement of the law and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.
Before acting on any of the information contained herein, expert legal or other advice should be sought.