Know Your Tax Penalties

Every taxpayer should look at the taxes they are liable for and research the penalties for late filing and late payment.

When you have worked out the scale of the penalties that you might face, you can work out the importance of compliance.

Many might be surprised that late payment of corporation tax attracts just 3% late payment interest.  Being 3% a year = 0.25% a month = 0.05% a week = next to nothing for a day.  Corporation tax is of course just 20(odd)% of profits.  0.05% of most companies profits is not going to be an upsetting number.

On the other end of the scale, 1 day late paying your VAT can cost you a penalty of 15% of your VAT bill.  As VAT is 20% of your turnover (not profit), this can be a very scary number indeed.

So, if you have only so much cash flow, don’t go paying your corporation tax until you are sure you can afford your next VAT bill.

There is little logic and consistency in the application of tax penalties.

It pays to learn the rules and the consequences of non-compliance.