What account in COA should I use for Penalties to Companies House?

Accounting
1

Hi

I have a late filing penalty from Companies House which I need to enter as a “purchase”. I’m not sure which “account”/category to use? Or should I create a new one in the Chart of Accounts?

Thanks!

2

I’m afraid it’s not an allowable expense, HMRC state on their website:

"A fine incurred as a result of a trader’s infraction of the law is not allowable on the authority of CIR v Alexander von Glehn Ltd [1920] 12TC232, as it is not incurred wholly and exclusively for the purpose of the trade."

I would recommend you create a new nominal code called ‘Fines and Penalties’ and post the transactions to this nominal code, at the year end this can be adjusted as disallowable expenses.

3

What category should this nominal code be in? And how do we make it a disallowable expense at the end of the year?

Thanks.

4

You may find this forum post to be useful:

How should a fine from HMRC or Companies House be treated

Basically you’d need to create a nominal code in the 79… range. As the penalty is not tax deductible you’d need to manually add it back. In your tax summary you can manually configure you’re own add-back codes.

5

I’m in this situation too, what if I was to add it as a “professional” fee? Would this add the entry back to the tax summary so I still pay tax on that amount?