Most people are aware that HMRC will charge you for paying tax late. It’s not always called the same thing – interest, penalty, surcharge – and it’s different depending upon the tax it relates to, but that’s the essence of what happens.
However, if you are a limited company, you can be paid interest by HMRC for paying your corporation tax early.
Corporation tax is usually payable 9 months and 1 day after the year end, so for a 31st December year end, corporation tax is due by 1st October. If you pay it early, then HMRC will pay you interest on your payment between the date you paid and the due date.
HMRC currently pays interest at base rate less 1%. At the time of writing, base rate is 5.25%, so the interest they pay is at 4.25%.
Depending upon the amount of interest, HMRC will either physically repay the interest after the due date, or carry it forward on your account to be deducted from the next year’s corporation tax bill.
More details here.
N. Goddard
7.3.24
