Limited companies, whether private or public, are required to file annual accounts with Companies House and HMRC. Companies House can and will impose a late filing penalty if you fail to file your accounts on time.
Penalties for late filing were first imposed in 1992 in order to reduce the number of businesses that filed their accounts late or did not file at all. The Companies House late filing penalties have since been increased in order to encourage more directors to file their accounts on time.
How much will missing the deadlines cost you? At the time of writing, Companies House late filing penalties for annual accounts are as follows:
Private Limited Company (LTD)
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- Less than 1 month late: £150
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- More than 1 month but not more than 3 months late: £375
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- More than 3 months but less than 6 months late: £750
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- Over 6 months late: £1,500
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- Public Limited Company (PLC)
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- Less than 1 month late £750
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- More than 1 month but not more than 3 months late: £1,500
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- More than 3 months but not more than 6 months late: £3,000
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- Over 6 months late £7,500
We should also note here that failure to file proper accounts can, and sometimes is, construed as a criminal offence.
After missing the September filing deadline last year, more than 25,000 businesses were hit with automatic late filing penalties, according to Companies House themselves. So, how do you avoid becoming one of them this tax year? Here are some of our top tips.
Plan Early
Know when your company’s accounts must be filed and start planning ahead of time. If you’re a small business, keep in mind that you can no longer file abbreviated accounts. You may have other, simpler choices than filing a full set of accounts – such as filing micro-entity accounts – but the faster you work out how and what you are going to file, the better.
Ask the Government to Remind You
Ignorance is no excuse when it comes to tax filing deadlines. To that end HMRC have set up a handy service that will send you four different email reminders about when your accounts are due to be filed. Signing up for these may help you remember, no matter how busy you are. After all, there’s nothing like a note from the taxman to remind you they want their money…
Do Things Right the First Time
If you file your accounts on time, but then they contain errors and/or omissions that need to be corrected, the clock does not stop. To avoid facing a late filing penalty, even though you filed on time (but with errors) ensure that everything is right before you file.
Allow Extra Time for Paper Filing
Most firms file their accounts electronically and that really is the best way to go. Some businesses, however, will have to file paper accounts, which take longer to process than online accounts.
Paper accounts must be manually checked by Companies House. This can take up to a week in some cases. Companies House will reject your accounts if they are incorrect or lack some essential information, and again, that may end up leading to late filing penalties even though, technically, you got them in on time.
Can I Appeal Late Filing Penalties If They Are Assessed?
We all know that life surprises us in less than good ways from time to time, and events can throw us off track. This past year has amply demonstrated that. HMRC outlined what it considers a “reasonable excuse” for late filing or payment even before COVID.
If you receive a late filing penalty, you may be able to appeal it if you were unable to file your tax return on time due to extenuating circumstances.
Reasonable excuses include the following:
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- You had an unexpected hospital stay that prevented you from meeting your obligations.
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- Your partner or another close relative died shortly before the deadline for filing a tax return or payment.
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- You were afflicted with a serious or life-threatening disease.
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- Despite your best efforts to keep it up to date, the software you use to complete your returns failed just before the deadline.
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- HMRC had technical issues, such as the accounts filing portals going down.
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- Fire, flood, or theft prevented you from filing your return on time.
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- Your delay was due to a disability.
HMRC will still want to see that you took ‘reasonable care’ to meet your tax obligations, so your case will be looked at on an individual basis. I forgot is obviously not an acceptable excuse, especially when you should have signed up for those emails…
The Best Way to Avoid Late Filing Penalties
The very best way to avoid Companies House late filing penalties is to have an accountant in charge of your finances, including the filing of company accounts. As a small business especially, you may be looking for ways to save money, but there are better ways to do so than trying to keep up with company finances all by yourself. In fact, if you hire an accounting team like Pearl Lemon Accounting, we can help you discover what those are. Contact us today to chat about how we can help you.
