Corporation tax: determination of penalties – (Notes CT211)

Insight

HMRC will issue a Penalty Determination using Form CT211 when their records show that your business has not filed its return(s) by the required date.

Penalties for late filing start at a flat rate of £100 and can increase to up to £1000 plus tax related penalties of up to 20% of any unpaid tax. If you have received a decision, you must act now and submit the statements to avoid further penalties.

If your company has a professional advisor or agent, show them the penalty determination as soon as possible. HMRC will have sent a copy to your agent if you have authorized him to do so.

What these notes cover

These notes provide general information on the attached penalty determination. They explain :

• your obligation to file a return on or before the filing date
• the sorrows HMRC charge if you don’t produce on time
• how to appeal if you disagree with the sanction
• how to pay
• what to do now to avoid further penalties
• where you can find more information and help

The notes are not a complete guide to the law.

The law applicable to self-assessment of corporation tax (BBRI) reporting periods ending on or after 1 July 1999 are set out in Schedules 18 and 19 of the Finance Act 1998. Different legislation, the Tax Administration Act 1970, applies to the payment and deposit corporation tax (CTPF) the return periods ended on or after October 1, 1993 and before July 1, 1999.

Your penalty determination indicates which law applies, based on the end date of the return period. These notes do not give a full description of the BBRI diet. More information on corporation tax is available, or you can contact HMRC at the address or telephone number listed in your Penalty Determination.

1. The filing obligation

Your business must file a return or returns if HMRC issue a CT603 notice to file a corporation tax return.

You normally have to file a return for an accounting period, but sometimes you will have to file one for a period when the business was inactive. This can happen when a company starts doing business sometime after it is incorporated.

The return usually consists of all of the following:

• a completed CT600 corporation tax return form, the online equivalent thereof, or an approved replacement
• accounts, as described in the remittance notice
• calculations showing how the return form figures were obtained from the accounts

For BBRI return deadlines, you may also need to complete and include additional page(s) of the returns form. The return must be delivered to the officer who issued the notice of remittance on or before the filing date, which is the later of the following dates:

• 12 months from the end of the period for which the return is made
• 3 months from the date of formal notice
• 12 months from the end of the company’s relevant accounting period, if this does not exceed 18 months
• 30 months from the beginning of the company’s relevant accounting period, if this is longer than 18 months

You can find more information on these and other points in the CT600 Guide.

2. Fixed penalties

Your business is subject to a standard penalty if it is required to provide a corporate income tax return and does not do so by the filing date. The penalty is:

• £100 – if the return is delivered within three months of the date of filing
• £200 – in all other cases

Increased rates apply (£500 and £1,000 respectively) if your company repeatedly fails to provide returns by the filing date.

Where returns for three or more consecutive accounting periods are filed late and your company was subject to penalties for the first two of those periods, the flat penalty for the third and each successive late return is charged at the appropriate increased rate.

Your company is not liable to a fixed penalty if the following two conditions are met:

• the period for which the company tax return is required is the period for which the company is required to provide accounts under the Companies Act
• the declaration is delivered no later than the last day of delivery of these accounts to the Registrar of Companies

In addition to a possible lump sum penalty, your company is also liable to a tax-related penalty if it is required to file a corporation tax return and does not do so within 18 months of the end of its accounting year (or by the filing date if later). The penalty is calculated as follows:

• 10% of unpaid tax where a return is issued within two years of the end of the period covered by the return
• 20% of the unpaid tax in all other cases

For reporting periods ending on or after July 1, 1999, “unpaid tax” means the amount of tax payable by the company for the accounting period for which the report was required, which remains unpaid 18 months after the end of the accounting year or on the filing date if later.

For reporting periods ended before July 1, 1999, “outstanding tax” means the amount of tax owing by the company for the accounting period for which reporting was required, which remains unpaid 18 months after the end of the period accounting.

4. calls

You can appeal if you think the amount shown on the Penalty Determination is excessive or not due. You should:

• write to HMRC address on the Sanction Determination within 30 days of the date the Sanction Determination was issued
• state why you think the penalty determination is wrong
• quote the reference and the period indicated on the determination of the penalty

If you think your business has a reasonable excuse for not filing its return by the filing date, say so. HMRC what it is. They will try to settle any appeal in agreement with you.

If you cannot reach an agreement, you can have your appeal reviewed by someone who was not previously involved. You can ask HMRC to arrange an exam or they can offer you one at any time during the discussion of your call. Once the exam is complete, HMRC will write and tell you the result and explain the decision.

Whether or not you choose to have an exam, you will also have the right to appeal to an independent tribunal. To do so, you must contact the Courts Service within 30 days of the determination of the sanction or within 30 days of the letter advising you of the findings of HMRCthe exam.

If you ask HMRC to conduct a review or accept their offer to review, you cannot appeal to the court while the review is ongoing.

5. Payment

Unless you appeal, the amount charged against the Penalty Determination is due and payable in full, 30 days after the date the Penalty Determination is issued. Payment to HMRC can be done by a variety of methods. Instructions can also be found in the letter that accompanies your sanction decision.

6. Other sanctions

Your business must submit one or more statements of its profits, losses and other information required for the purposes of corporation tax laws for the period indicated on the notice. You must act now. Other penalties may be charged automatically if you fail to deliver the overdue return(s), including accompanying documents.

7. Additional information and help

Most businesses and agents must file their accounts and tax returns online.

More information is available on how to complete and file your corporation tax return.

If you are exempt from online filing, you can download hard copies of the CT600, the CT600 Guide, or any of the additional pages needed.