PAYING EARLY: The benefit of making an early payment for Corporation Tax may not suit every company. But, it is a better option, and less expensive, than making a late payment.
In fact, you get nine months and one day to pay your Corporation Tax bill after your year end.
But, being even one (1) day late with the payment will most likely result in penalties from HM Revenue and Customs.
Paying corporate taxes early removes the temptation of spending money owed to the taxman.
Company directors should also consider the disadvantages of paying Corporation Tax early. There is a downside to making early payments.
As a rule, it would result in a loss of cash flow. Thus, you lose the opportunity to invest those funds back into the business. You may even miss out on a chance of getting higher returns elsewhere.
So, what should you do if your company or organisation has paid too much Corporation Tax? You would need to inform HM Revenue and Customs about the overpayment.
HMRC will repay the amount you overpaid and pay interest on it as well (in some cases). The current interest rate paid by HMRC for paying too much Corporation Tax is 0.5%.
Corporation Tax Refund UK
If you believe you should get a Corporation Tax refund, use your Company Tax Return to inform HMRC about it. HM Revenue and Customs call it a ‘repayment. There are several ways to get it paid, including:
- Having it paid direct to your company bank account. Include the account number and sort code on the tax return to get it paid into the account of someone else.
- Using it to pay towards the next Corporation Tax bill or to pay off a late filing penalty.
- Using the Corporation Tax repayment to pay off other taxes that your company owes (e.g. PAYE or VAT).
HMRC Credit Interest and Repayment Interest
HM Revenue and Customs pay two different types of interest. They will pay:
- ‘Credit interest’ if you paid tax early.
- ‘Repayment interest’ if you paid more than your company owes.
Note: HMRC interest is taxable so you must include it as income when you file your Company Tax Return.
Making Early Payments
As a rule, HMRC pay interest from the date you pay Corporation Tax up to the payment deadline. The earliest date they would pay interest from is six (6) months and 13 days after the start of accounting periods for Corporation Tax.
Paying More than Your Company Owes
In most cases, if you pay more than you owe, HM Revenue and Customs would pay interest on the refund from either:
- The date when the tax was due.
- The date when you paid the tax (if it was after the due date).
Paying in Instalments
HMRC pays interest by automatic process after knowing your final Corporation Tax bill for the accounting period. As a rule, this would be when you file your Company Tax Return.
They would calculate it from a different date if you pay the bill by quarterly instalments. In this case, they would pay interest calculated from the later of these two dates:
- The date of the first instalment.
- The date that the balance goes above what you owe.
ALSO IN THIS SECTION
Corporation Tax Rates and Reliefs | Find out how to get allowances, reliefs, and other tax deductions.
File Your Company Tax Return | Check out the process for using the government online tax service.