CPA Bulletin

www.cpa.uk.net CPA Bulletin > February 2019 49 LEGAL: 2 At the time of writing this article, the draft Finance Bill 2019 includes a provision for Her Majesty Revenue and Customs (HMRC) to apply penalties for the late payment of corporation tax. The 2009 Finance Act contained provision for penalties to be applied in cases of late payment of corporation tax, but those provisions were never implemented. There are already penalties for the late filing of the corporation tax return itself, however, generally the filing due date for the return is some 3 months later than the normal due date for payment of the actual corporation tax. Therefore, until now, up to a 3 month cash flow advantage could be gained by delaying the filing of the return (and also the payment) until close to the return filing deadline. Upon filing of the return HMRC do aggressively pursue any unpaid tax, but the amount of underpaid tax is subject only to an interest charge at relatively benign rates. This relaxed approach to late payment of corporation tax has, for some time, been at odds with the way in which late payment of other taxes such as PAYE and VAT have been penalised. It seems that all this could be about to change. The draft Finance Bill 2019 includes provision, to apply penalties to late payment of corporation tax for the first time. The draft legislation suggests that for most simple cases a penalty will be payable if the tax is not paid within 15 days of the normal due date (usually 9 months after the year-end). A further penalty will be payable if the amount is still not paid after 30 days. The level of the penalties has not yet been specified. In accepting that it may not always be possible to pay the right amount of corporation tax by the normal due date (for example when the return hasn’t yet been finalised), the draft legislation suggests that no penalty will be due where a reasonable estimate of the corporation tax is made and paid by the normal due date. In such cases any shortfall will become due on the date the return is filed rather than the normal due date for tax, with the penalty structure applying thereafter. The draft legislation should not impact on those companies who need to pay their corporation tax in instalments, whose payments are subject to a separate timing and interest regime, except where amounts due under instalments remain outstanding more than 9 months after the year end. It remains to be seen how severe the penalties will be but if other taxes are anything to go by, they are likely to be costly. This will result in the need for some companies to carefully review and better plan their cash flow around the timing of corporation tax payments. It seems likely that implementation of penalties is still a couple of years away, so there is time to plan ahead. Late Payment of Corporation Tax New Draft Penalties