If your company or organisation is liable for Corporation Tax you must pay any Corporation Tax that's due on time. If you don't, HM Revenue & Customs (HMRC) will charge you interest on a daily basis.
This guide tells you when interest is charged and how it's calculated.
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If you pay your Corporation Tax late, don't pay enough or don't pay at all, HMRC will charge your company or organisation interest. This interest is known to HMRC as 'late payment interest'.
Interest is charged from the day after the tax should have been paid (normally nine months and one day after the end of your accounting period) until the date you pay it.
Interest charges are automatic. However, interest is not charged on interest itself.
Any late payment interest you pay to HMRC is tax deductible for Corporation Tax purposes. This means you can include this expense in your company accounts for the accounting period (or periods) when the interest was incurred.
In these circumstances, HMRC will charge your company late payment interest for the period 2 October 2010 to 30 November 2010.
But you can deduct this interest as an allowable expense when calculating your taxable profit for the accounting period when your company incurred the interest - the accounting period that ended 31 December 2010.
If your company’s profits for an accounting period are at an annual rate of more than £1.5 million, you must normally pay your Corporation Tax for that period in instalments. If you have one or more associated companies this rate is reduced - please follow the links below for more information.
These instalments are all due to be paid earlier than nine months and one day after the end of the accounting period.
HMRC charges interest on late instalment payments. If you do have to pay interest, it's tax deductible for Corporation Tax purposes.
Although this interest applies from each of the instalment payment due dates, it isn’t actually calculated until after the normal due date for the accounting period (which is nine months and one day after the end of the accounting period) has passed, and one of these two events has taken place:
Two different rates of interest are charged by HMRC on late payments of Corporation Tax by instalments:
This two-tier system takes into account the fact that you will be making your instalment payments based on estimated figures but, by the time of the normal due date, should be fairly certain about the amount of your liability.
You can't appeal against an interest charge, but you can make what HMRC calls an 'interest objection' if you think HMRC has made a mistake.