Section A: Objective Test

Which of the following statements regarding the penalty for late payment of Corporation Tax is correct?

Answer options:

A 5% penalty is charged if the tax is more than 30 days late.

A fixed penalty of £100 is charged immediately upon late payment.

There is no statutory penalty for late payment of Corporation Tax, but late payment interest is charged.

A penalty of 10% of the unpaid tax is charged if not paid within 6 months.

How to approach this question

Distinguish between late filing penalties (which exist for CT) and late payment penalties. For Corporation Tax, late payment only attracts interest, not a percentage-based penalty.

Full Answer

C.There is no statutory penalty for late payment of Corporation Tax, but late payment interest is charged.✓ Correct

For Corporation Tax, while there are strict penalties for late filing of the CT600 return, there are no statutory penalties for the late payment of the tax itself. Instead, HMRC charges late payment interest on the outstanding balance from the due date until the date of payment.

Common mistakes

Confusing Corporation Tax late payment rules with Income Tax self-assessment late payment penalties (5% at 30 days, 6 months, 12 months).

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Practice the full ACCA TX — Taxation Practice Exam 5

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