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ACCA Applied Skills · Taxation (UK) · Penalties for non-compliance

Zed Ltd pays its corporation tax liability of £60,000 three months after the due date. Which of the following is the consequence of the late payment?

Late payment interest runs from the due date until the tax is paid, and no late payment penalty is charged. The percentage penalties apply to income tax balancing payments or to VAT, not to corporation tax paid late.

  1. AA 5% late payment penalty plus interest
  2. BA penalty of 3% of the tax, with no interest
  3. CLate payment interest is charged from the due date, with no late payment penaltyCorrect
  4. DA penalty of 6% plus a daily penalty at an annual rate of 10%

Explanation

Corporation tax paid late attracts late payment interest running from the due date until payment, rather than the percentage penalties that apply to income tax balancing payments. The 3% and 6% plus daily penalty rates in the tax tables relate to VAT. The 5% penalty is an income tax rule.

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