How to avoid Corporation Tax mistakes if you’re a limited company director

In a way, HMRC expects little from limited companies regarding Corporation Tax. All it asks is that you, as a director of the company, comply with all tax laws, fill out your company tax return correctly, file it on time, and pay up on time.

It sounds simple, but of course, there are many accounting rules to comply with and plenty of potential mistakes to be made.

Making a mistake or filing late can cost you both time and money to fix, especially if HMRC imposes a penalty.

Ultimately the company directors are responsible for the return, not the accountant. So while filling out a company tax return is best left to your accountant, you should be fully aware of the common mistakes made:

The tax return is not completed properly

This is one of the most common reasons why HMRC will query your Corporation Tax return.

Although your accountant is most likely to complete the form on your behalf, the company’s directors are ultimately responsible for the accuracy of the company’s accounts.

You submit your return late

When your business gets a notice to deliver a company tax return, it will have an issue date on the front and an accounting period. This is typically 12 months long and will be your financial year, for example, from 1st May 2023 to 30th April 2024.

The tax return is due to HMRC on the later of these two dates: either the first anniversary of the last day of the period (in this case, 30 April 2025) or the end of three months following the date the notice to submit a tax return was issued.

This means you always have at least three months from the moment you get a notice to get your company tax return sorted. However, don’t leave it until two weeks before! Unlike personal tax returns, which can be thrown together fairly quickly (especially if you are an employee), company tax returns take a little longer.

As well as penalties for late payment of Corporation Tax, if your calculations are incorrect, HMRC can apply a penalty of 30% to 100% of the potential lost revenue, depending on whether the mistake was ‘deliberate’ or not.

HMRC Corporation Tax late filing penalties

• 1 day late: £100 penalty.
• 3 months late: An additional £100 penalty.
• 6 months late: HMRC will estimate your Corporation Tax bill and levy a penalty of 10% of the unpaid tax.
• 12 months late: Another 10% of any unpaid tax.

You can find out more here

Company tax returns must be submitted online to HMRC and payment must be made electronically.

You miscalculate the tax due

There are so many rules and laws affecting tax that it really is inefficient and possibly even foolhardy to attempt your company tax return yourself.

A qualified accountant will work out all the figures and ensure the forms are filled out and filed correctly.

You make a late payment

Bizarrely, your company’s tax can be due BEFORE the tax return is filed. HMRC requires all companies to pay any outstanding tax no later than nine months and one day after the end of the accounting period.

In the example above, that would be 1st February 2025. You will have to pay interest on any late taxes.

Large companies—generally those making £1.5m or more in profit a year—are required to pay instalments throughout the year.

What to do if you realise you have made a mistake

You can change a company tax return within 12 months of the statutory filing date – the date we discussed earlier.

You will need to write to HMRC with details of the changes, complete with a declaration that the information is correct and complete to the best of your knowledge. Again, your accountant will advise on the best course of action.

If HMRC spots a mistake in your return, it can amend it any time up to nine months from the day you delivered it. If you make an amendment, you give them another nine months to make corrections.

It’s believed that HMRC will make no judgement on the accuracy of figures but will correct obvious errors, omissions, errors of principle, or mistakes that are added up. You can’t appeal against their corrections, but can amend your return to remove them.

Remember to get professional advice from a qualified person before taking any action. Don’t rely purely on the information contained in this article.