Tax payment deadlines
Time to pay - some common questions
We are seeing an increasing number of queries from our clients who would like to understand what the tax risks and consequences may be if they deferred tax payments and what options may be available to them and their business to manage their taxation liabilities in the current economic climate of increasing inflation and costs.
We have set out below an overview of:
- the general key payment dates for VAT, corporation tax and PAYE which are coming up over the next few months
- the consequences which may arise as a result of payment delays
- Time to Pay arrangements.
What are the due dates for tax payments?
- VAT returns filed - one month after the VAT period end. Some organisations benefit from a seven day extension.
- VAT tax payments - one month after the VAT period end. Some organisations benefit from a seven day extension.
- Corporate tax returns filed – 12 months after accounting period end.
- Non large entities - payments nine months and one day after end of accounting period.
- Large companies – quarterly instalment payments – 13th day of months 7, 10, 13 and 16 after the start of the accounting period for a 12 month accounting period. Slightly different rules apply for shorter or longer accounting periods.
- Very large companies – quarterly instalment payments – 13th day of month 3, 6, 9 and 12 after the start of the accounting period for a 12 month accounting period. Slightly different rules apply for shorter or longer accounting periods.
- PAYE / NIC and Construction Industry Scheme (CIS) – postal payments due by 19th of the following month for monthly payments.
- PAYE / NIC and CIS – electronic payments due by 22nd of the following month for monthly payments.
- PAYE/NIC and CIS – due by the 19th or 22nd (as above) after the end of the quarter if you pay quarterly, for example, 22 July for the 6 April to 5 July quarter.
- CT61 – income tax due for quarterly CT61 returns, normally 14 April, July, October and January.
- PAYE Settlement Agreement (PSA) – PAYE/NIC owed under a PSA must be paid by 22 October after the tax year the PSA applies to (19 October for postal payments).
- Submission of P11D and P11D (b) forms online to HMRC – 6 July.
- Class 1A NIC – postal payments due by 19 July.
- Class 1A NIC – electronic payments due by 22 July.
- ATED (Annual Tax on Enveloped Dwellings) submission – 30 April.
- P60 to all employees – 31 May.
- Second Payment of Account (POA) for income tax – 31 July.
- Hard copy self-assessment tax return submission – 31 October.
- Online self-assessment tax return submission – 31 January.
- Online self-assessment income tax return submission – 31 January.
- Income tax owed for previous tax year – 31 January.
- First Payment on Account (POA) for income tax – 31 January.
- ATED (Annual Tax on Enveloped Dwellings) submission – 30 April.
- P60 to all employees – 31 May.
- Second Payment of Account (POA) for income tax – 31 July.
- Hard copy self-assessment income tax return submission – 31 October.
When do HMRC start chasing for tax payments?
For corporation tax, HMRC will not start chasing for payment until a tax return has been submitted. It is at this point that HMRC will have information about the tax which is due and HMRC’s Collector of Taxes will normally, assuming the tax payment date deadline has been reached, start to seek to collect any unpaid tax which is due.
For VAT and PAYE/NIC late payments, HMRC will seek to chase soon after monthly or quarterly deadlines have been missed.
Delaying submitting your corporate tax return may provide a short reprieve from being chased by the Collector of Taxes for outstanding tax. However, it should be borne in mind that non-submission of tax returns on time can ordinarily lead to late filing penalties being imposed by HMRC and may be taken into account when HMRC consider a taxpayer’s general tax compliance record.
What are the penalties if I don’t file my tax returns/pay on time?
- For the first offence – HMRC will issue a warning letter, but no penalty will be charged.
- Second offence – 2% surcharge on unpaid VAT.
- Third offence – 5% surcharge on unpaid VAT.
- Fourth offence – 10% surcharge on unpaid VAT.
- Fifth and subsequent offences – 15% surcharge on unpaid VAT.
Once a company enters a surcharge period, the clock can only be reset to ‘no offence position’ once the business has filed 12 months’ worth of VAT returns on time.
- £100 late filing penalty if return not filed on time.
- Three months late – additional £100 penalty.
- Six months late – HMRC will issue a tax determination and will seek to collect the tax they have determined. 10% penalty based on the unpaid tax at that time.
- 12 months late – Additional 10% penalty based on the unpaid tax at that time.
The six month tax determination can only be overturned by making a valid corporation tax submission.
- For the first offence during a tax year HMRC will not charge a penalty for late filing/payment (unless the payment is more than six months late).
- 1-3 late payments – 1% of the total value of the late payments in the tax year.
- 4-6 late payments – 2% of the total value of the late payments in the tax year.
- 7-9 late payments – 3% of the total value of the late payments in the tax year.
- 10+ late payments – 4% of the total value of the late payments in the tax year.
Additional late payment penalties
- In addition to the above, late payment penalties can also arise, particularly if you have not paid a monthly or quarterly payment in full after six months. This additional penalty will be 5% of the amount unpaid.
- A further 5% penalty will be charged if payment remains outstanding after 12 months.
The above penalties apply for all monthly, quarterly or annual PAYE, CIS deductions and Class 1 NIC.
For annual payments such as employers’ Class 1A and Class 1B NICs, the additional late penalties noted above will apply after the due date with a 5% penalty being charged at 30 days, six months and 12 months.
What interest does HMRC charge if I delay paying my tax?
- If tax payments are paid late then, subject to agreement otherwise, late payment interest is due to HMRC. This accrues on a daily basis.
- HMRC’s late payment interest rate have been increasing over recent months as the Bank of England base rate has been increasing with the rate as at 31 May 2023 being 7%, having steadily risen from 3.5% a year earlier.
- HMRC’s interest rate on underpaid quarterly instalments is 5.5% from 22 May 2023, again having steadily increased from a rate of 1.5% in February 2022.
- Whereas, unfortunately, HMRC’s repayment interest on overpaid tax is currently at the lower rate of 3.5% from 31 May 2023.
In these difficult times, businesses may wish to consider whether late payment of their tax in the short-term, represents a cost effective funding option when compared to their other borrowing costs.
Can I revise my corporate tax quarterly instalment payments as I’m now expecting lower taxable profits?
As noted above, large and very large companies make corporation tax payments by way of quarterly instalment payments.
Each instalment payment should be based on the expected taxable profit outturn for the full accounting period, with each instalment based on the revised expectation at that point in time. For example, by the third instalment date, 75% of the company’s tax due should have been paid based on the expected full year results.
Where taxable profits are predicted to be lower as a consequence of business circumstances, then future quarterly instalment payments should be scaled back accordingly. Whereas, in the event that profits are expected to be higher, then future payments should ‘top-up’ the current position.
If companies believe that they have now overpaid quarterly instalment payments based on their new revised full year projections then they can contact HMRC to seek a tax refund of the overpaid tax.
Delaying tax filings and payments is an option that a number of businesses are considering. However, as noted above, there are various penalties and additional interest costs which can arise as a consequence of taking this action.
Time to pay
A time to pay arrangement is an agreement with HMRC to enable tax payments to be spread over a longer period of time than would otherwise be available and is often used for arrears of VAT, PAYE and corporation tax.
By approaching HMRC in advance of when payments are due, late payment penalties can sometimes be avoided, although late payment interest will normally still be applied.
Should it be decided that a more formal time to pay arrangement is therefore required then this can be arranged directly with HMRC. To access this service details of the tax reference numbers for each tax to be discussed will be required.
However, in our experience, how the application is presented to HMRC can make a large difference to the outcome, as HMRC will want to be able to satisfy themselves as to when the tax will paid and that the business is not seeking to deliberately avoid meeting its tax liabilities. Having a good historic payment record can therefore also be important.
If the agreed payments are not made in full and on time, then HMRC can cancel the time to pay arrangement and seek immediate payment of the total outstanding debt. In addition, penalties can be charged. Seeking professional advice throughout the time to pay arrangement process is therefore recommended.
For any further help and assistance for your business, please do contact your usual Crowe contact.
