Property Companies Delaying Tax Filings Should Expect Harsh Penalties

A property development company had no excuse to miss corporation tax filing and payment deadlines that left them to pay thousands of pounds in fines and interest, a judge at a tax tribunal ruled. 

Director Mrs Pragya Singh of Caris Properties Limited told the First-Tier Tax Tribunal that the company had relied on their accountant to file the corporation tax return on time despite not paying his fees due to ‘cash flow problems’. 

But the accountant had stopped acting for them, even though the director claimed she was unaware of his action. And her legal team told the tribunal that “there was nothing necessarily unreasonable in relying on an accountant where that reliance leads to failure to comply with an obligation.” 

The company was appealing an HM Revenue & Customs tax penalty of £34,870 calculated as 10% of the late paid corporation tax due plus interest of £8,236. 

The tax return was filed three months late in the belief the company could find the money to pay the £348,705 tax bill at that time, while a £200 fixed penalty and interest charge for late filing were paid. 

The tribunal rejected the appeal because Mrs Singh and her co-director were experienced in business and should have known the rules of paying corporation tax and that ‘any prudent taxpayer’ would have made arrangements to meet the tax liability. 

Under corporation tax rules, a £100 fixed penalty is charged for filing a return up to three months late and then £200, increasing to £500 and £1,000 for filings delayed even longer. 

A tax-geared penalty of 10% of the tax due is imposed if the return is not filed within 18 months of the end of the accounting period or by the filing date if that is later. The rules apply to all companies, including property rental businesses.