Understand your company's position and learn more about the options available
Published:
What happens if I cannot pay Corporation Tax?
If you cannot pay your Corporation Tax, HMRC can take debt recovery action against your company. However, if you speak to HMRC and make them aware of the problems you are facing, you may be able to negotiate a Time to Pay (TTP) arrangement to give you additional time to clear your arrears and bring your tax account up to date.
What happens if my limited company cannot pay its Corporation Tax bill?
If you can’t afford, or are otherwise unable to pay your corporation tax bill in full or on time, it is vital you seek expert help and advice as a matter of urgency. When it comes to recovering Corporation Tax, or any other tax owed by a limited company, HMRC are relentless in their pursuit. The sooner you confront the problems you are having with your corporation tax bill, the better the chance of a positive outcome.
Failure to keep up with your obligations to HMRC, including corporation tax, will initially see you hit with financial penalties thereby increasing the amount you owe and exacerbating the issue. Charges will be levied from the moment your payment is late and interest will begin to accrue so it is vital you adhere to your payment deadline if you are in a position to do so. Continued late payment will see further action taking place through distraint, the issuing of a statutory demand, or even a winding up petition.
Free 60 Second Test
For Ltd Company Directors
What are you looking to do?
Choose below:
What are your options if you cannot pay your Corporation Tax?
If you are either unable to pay your corporation tax bill or believe you will have no choice but to pay it late, communication with HMRC is key. The sooner you contact HMRC and make them aware of your situation the more options will be open to you and the less likely you are to face penalties or court action.
If you need more time to get the money together to pay the amount in full, you may wish to enquire about the possibility of paying your corporation tax in instalments. HMRC will consider requests from companies asking for additional time and may be able to help by setting up a payment plan. You can read our main page on HMRC Time to Pay (TTP) Arrangements here - https://www.realbusinessrescue.co.uk/tax-hmrc/time-to-pay
Get a Quote Find Your Nearest Office
What is HMRC Corporation Tax?
Corporation tax is a corporate tax imposed on the profits of limited companies which are trading and registered in the UK. It is the responsibility of all company directors to register their business for corporation tax with HMRC. In fact this is one of the first things you will have to do once you beginning trading under a limited company structure; it is a legal requirement to do this within three months of starting to trade. Dormant companies do not need to register for corporation tax until a time when their status changes.
“I completed the simple on line form, received the free guide by email immediately and then a call from Tom who was so very helpful. Highly recommend this service”
Pauline Whitehead
Who pays corporation tax?
As a limited company, you will be required to pay corporation tax once you begin turning a profit, although losses can be carried forward from previous years. If you are operating at a loss you will not have to pay corporation tax but you will be required to notify HMRC of this fact. Sole trader businesses are not liable for corporation tax but they will, however, need to pay income tax on their profits.
Dealing with HMRC debts?
If you are experiencing pressure from HMRC for unpaid tax liabilities, you are far from alone. In fact HMRC is the most common creditor of businesses in the UK. For expert help and advice in tackling your tax debt, call our team.
The team are available now - 0800 644 6080
How much Corporation Tax will I have to pay?
The amount of corporation tax you will be required to pay will depend on the annual profits of your company. A company’s total profits are calculated on the money made through usual trading activity, as well as on any investments the company has, any money earned through rental income, and any profits made from the sale of assets.
The current rate of corporation tax for companies with profits under £50,000 is 19%; this is known as the small profits rate. The main rate of corporation tax is levied on companies with profits over £250,000 which is currently 25%. For those companies with profits between £50,000 and £250,000, they will pay tax at the main rate but this will be reduced by a marginal relief providing a gradual increase up to the 25% figure.
When is corporation tax due and how often do I have to pay it?
When your corporation tax has to be paid depends on your company’s corporation tax accounting period. For many companies this is 31 March, although yours may be different. Corporation tax is due nine months and one day following this date. For those companies with a 31 March accounting period end date, this would mean their corporation tax would be due on 1 January the following year. However, you must ensure you are aware of your own corporation tax deadline; ask your accountant if you are at all unsure.
Corporation tax is payable annually, and for companies with profits below £1.5m this should be done by way of a one-off payment. Companies whose profits exceed £1.5m will typically pay their corporation tax in four instalments.
While corporation tax can be complicated, it is your responsibility as a limited company director or contractor to ensure that this is paid on time. Failure to do so is an extremely serious matter and could result in HMRC petitioning for the compulsory liquidation and closure of your company if you let the situation continue unresolved.
Can’t pay CBILS or Bounce Back Loan?
Don't worry - there are thousands of other company directors in the same position. If you are struggling to keep up with your Covid loan repayments, speak to a member of the Real Business Rescue team to discuss your options. It's Free & Confidential.
The team are available now - 0800 644 6080
Need to speak to someone?
If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
Call our team today on 0800 644 6080
Alternatives for Corporation Tax Debt
If you are struggling with corporation tax or any other debts and you feel the situation is beyond rescue, you may need to consider ways of closing the business through a formal insolvency procedure. Perhaps you know your company is not in a position to repay its tax arrears, or maybe the business has other considerable debts in addition to corporation tax arrears which you know the company is unlikely to be able to manage going forwards.
Real Business Rescue’s nationwide team of licensed insolvency practitioners can look at various options for your company when it comes to dealing with a corporation tax bill it simply cannot afford to pay, whether that be entering into a payment plan or closure options such as liquidation. Call our experts today to arrange a free no-obligation consultation.
Real Business Rescue are here to help
Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.
- UK’s Largest Liquidators
- 100+ Offices Nationwide
- 100% Confidential Advice
- Supported 25,000+ Directors
Looking for immediate support?
Complete the below to get in touch
Free 60 Second Test
For Ltd Company Directors
What are you looking to do?
Choose below:
We provide free confidential advice with absolutely no obligation.
Our expert and non-judgemental team are ready to assist directors and stakeholders today.
Find your nearest office - we have more than 100 across the UK. Remote Video Meetings are also available.
Free, confidential, and trusted advice for company directors across the UK.