Corporation Tax Act 2009 section 1303

Penalties, interest and VAT surcharges

Section 1303 prevents companies from deducting tax penalties, related interest charges, and VAT default surcharges when calculating their profits for corporation tax purposes.

• Tax penalties and statutory interest charges imposed by HMRC across a wide range of taxes cannot be deducted when calculating profits for any corporation tax purpose
• The non-deductible items cover penalties and interest relating to VAT, excise duties, insurance premium tax, landfill tax, climate change levy, aggregates levy, customs duties, stamp duty land tax, and construction industry scheme deductions
• VAT default surcharges under the late payment regime are also specifically blocked from being deducted against corporation tax profits
• The rule applies broadly to all profit calculations, including both trading income computations and deductions from total profits such as expenses of management