Unable to pay Corporation Tax on time?
Running a limited company can come with it's challenges, and sometimes planning head or budgeting for future corporation tax bills can be hard. Companies having difficulties paying corporation tax is more common than you think; it is always best to have clear and direct communication with HMRC if you are aware that you are unable to pay or if you are going to pay the bill late. The sooner you contact them, the better!
Reminders for Corporation Tax and the CT600 Return
- Corporation tax is the taxation on limited company profits for companies trading and registered in the UK. If your company is operating at a loss, you will not typically have to pay corporation tax for that accounting period.
- The amount of corporation tax due will be calculated in the Corporation Tax (CT600) return, which will need to be prepared and submitted to HMRC. – This is something that we offer through our software where you can submit both a CT600 return and accounts directly to HMRC! For more information, please feel free to check out our article on completing a CT600 return
- The CT600 return itself is due 12 months after the accounting period end date, however any corporation tax is due 9 months and 1 day after the period end. For example: if your company’s accounting period was from 1st January 2025 – 31st December 2025, then any corporation tax payment deadline would be on 1st October 2026 and the CT600 return's deadline would be on 31st December 2026.
HMRC Payment Plans
HM Revenue and Customs (HMRC) have in place payment plans in this eventuality for individuals unable to meet their payment deadline; this is for paying corporation taxes, as well as for self-assessment taxes. The payment plans will allow the individual to pay in instalments, where each plan will depend on the individual's needs.
It's important to notes that if HMRC and the individual are unable to come to an agreed payment plan, then typically HMRC would expect the full corporation tax bill to be paid upfront before the tax payment deadline. Any payments after the deadline would still be subject to late payment penalties.
Time to Pay arrangements (TTPs):
TTP plans are set up by HMRC and allow them to collect tax from persons who cannot pay on the due date, in instalments. Typically, the TTP plans run over a few months where monthly transactions are paid, although can be extended (any plan over 12 months will need to be authorised by a manager).
Setting up a Payment Plan
In order to set up a payment plan for late corporation tax, HMRC will require a list of the following:
- Your relevant reference number for paying tax, which is typically your Unique Taxpayer Reference (UTR) number. The companies UTR is usually sent on any correspondence letters from HMRC.
- Your UK bank account details (account number and sort code for direct transactions)
- Information surrounding the company’s income and spending if tax is owed
Unable to make the payments Online?
You will be able to set up a payment plane online through HMRC’s website, however if you are unable to do this electronically, you will need to inform HMRC with a list of the following information (which can be done over the phone):
- If you can pay in full.
- How much you are able to repay monthly.
- If there are any other outstanding tax bills due.
- How much money you earn
- The amount of typical outgoings each month
- Any savings or investments that you have
If the company is tax debt, then usually HMRC will ask you how you will pay your corporation tax bill as soon as you can. This is so they can choose an appropriate and affordable plan. Please note that debt should be reduced as much as possible before deciding on the plan.
Refusing to Pay/ Not Contacting HMRC
HMRC will try to contact you if they do not receive a tax payment by the payment deadline, typically via phone. If no contact with HMRC has been efforted or if no payment plan has been agreed upon, then there may be consequences put in place.
For example: HMRC can contact the debt collection agency to collect money owed, they may decide to collect this directly from your wages/ pension payments or even take money directly from your bank account or building society. In extremer cases HMRC can take you to court, make you bankrupt or close the company down.
Plan of action
If you are in a position where you are worried your corporation tax bill will not be paid off in time for the deadline, then making a plan of action and contacting HMRC as soon as possible is the best thing to do.
The key points to takeaway:
- Knowing your corporation tax payment and tax return deadlines.
- Knowing how much corporation tax due – or rather making provisions for the amount that is likely due for said accounting period.
- If you are unable to pay the tax bill on time then you will need to contact HMRC to set up the most appropriate payment plan – for payment problems regarding corporation tax you can contact HMRC on 0300 200 3840.
- If you are unable to come to an agreement on a payment plan, HMRC will typically expect you pay the corporation tax bill upfront, before the deadline.
This article is for information purposes only, if you are struggling to meet your corporation tax deadlines then you will be able to seek help and advice elsewhere. HMRC suggest Money Helper as a resource for more information on debt management (if you are a resident of England or Wales). Please head to HMRC's website on more information on this.
