Learning More About HMRC Penalties for Businesses

Learning More About HMRC Penalties for Businesses

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Businesses in the UK have a responsibility to complete tax returns accurately and on time. If discrepancies are found or deadlines aren’t met, the HMRC will impose penalties on the company depending on the amount owed and degree of lateness.

If you don't file your tax return, or make an error, there will be a penalty to pay.

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Businesses need to calculate Corporation Tax themselves (this is the amount required on a limited company’s taxable profits, up to £1.5 million). It should be paid nine months and one day after the end of your accounting period, which usually accounts to your financial year.

Not declaring yourself liable for Corporation Tax denotes a ‘failure to notify’ penalty. Without a reasonable excuse for doing so, you’ll have to reimburse unpaid tax that would have been owed – in other words, the ‘potential lost revenue’ – as well as a penalty.

Late Charges
Fixed penalty charges will be incurred for both late payment and late filing of tax returns. These penalties are as follows:

1 Day Late – £100 penalty
3 Months Late – £100 penalty
6 Months – 10% penalty added to estimated tax bill
12 Months – 10% penalty added to estimated tax bill

If payments are late on Corporation Tax, then your company will also be charged ‘late payment interest’ by the HMRC until the full amount is paid up.


Get your tax return in on time to avoid penalties.

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The current rate of interest on late payments has been set at 3.0% since 29 Sept 2009.

  • The current rate of interest on late repayments has been set at 0.5% since 29 Sept 2009.

Inaccurate Returns
Penalties on inaccurate returns are calculated by deliberating the severity of your error. For example, the fine for a careless or non-deliberate mistake will be no more than 30% of the potential lost revenue. On the other hand, deliberate and concealed fabrications can invoke a 100% penalty on the potential lost revenue.


Penalties will be payable for errors made on your self assessment.

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Realising and admitting miscalculations before the tax office does is known as ‘unprompted disclosure’. The opposite – waiting for the HMRC to discover errors before admitting them – is known as ‘prompted disclosure.’ As expected, the penalties for each discrepancy differ:

Type of error Penalty range for unprompted disclosure Penalty range for prompted disclosure
Careless 0% to 30% 15% to 30%
Deliberate but not concealed 20% to 70% 35% to 70%
Deliberate and concealed 30% to 100% 50% to 100%

Remember to keep your accounts accurate and up-to-date so mistakes don’t occur. Have a clear calendar with all deadlines noted so you don’t miss a deadline and contact the HMRC if unsure over any tax details.

If you’d like to know more about taxes in your business, you might be interested in Why You Shouldn’t Try Do It Yourself Accounting and Are Entertainment Costs Ever Tax Deductible?

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