Corporation Tax is the tax a limited company pays on its profits. Unless the company is large enough to pay in quarterly instalments, which starts at profits of more than £1.5 million a year, the bill falls due nine months and one day after the end of its accounting period.
Missing that date doesn’t bring a fixed penalty, but interest starts on the unpaid balance the next day. If the debt stays unpaid, HMRC can send debt collectors, take money from the company’s bank account or take goods to sell, and in the end present a winding-up petition, a court application to close the company.
The main way to stop that is a Time to Pay arrangement, HMRC’s name for a payment plan that spreads the tax over a number of months. HMRC agrees one only where the instalments are affordable and the company can keep up with its other taxes, so it suits a temporary shortfall in a business that’s otherwise paying its way.
If the Corporation Tax is one of several bills the company can’t meet, a payment plan only puts the problem off, and the more useful question is whether the company is still solvent, meaning able to pay its debts as they fall due.
Whether it’s a short gap or something wider, file the Company Tax Return on time even if you can’t pay the tax on it, because late filing carries fixed penalties of its own on top of the interest.
Key Takeaways
- Corporation Tax is normally due nine months and one day after the end of the accounting period, and paying it late brings interest at HMRC’s late payment rate (7.75% a year, rising to 8.00% from 24 November 2026), charged daily, rather than a fixed penalty.
- Filing the Company Tax Return late is a separate failure with its own fixed penalties, starting at £200 the day after the deadline and reaching 10% of any unpaid tax once the return is six months late.
- HMRC’s payment problems line for Corporation Tax is 0300 200 3840, and HMRC can agree a Time to Pay plan where the company shows the instalments are affordable and it can keep up with its other taxes.
- Corporation Tax is not a preferential debt if the company becomes insolvent, unlike VAT and PAYE, but that only affects what HMRC recovers in a liquidation, and HMRC can still serve a statutory demand and petition to wind up a company over unpaid Corporation Tax.
Quick Answer: What to Do When You Cannot Pay Corporation Tax
If your company can’t pay its Corporation Tax, or HMRC has already written about an unpaid bill, ring HMRC’s payment problems line on 0300 200 3840 (Monday to Friday, 8am to 6pm) and ask for a Time to Pay arrangement (TTP).
Go into the call with a monthly figure you can show the company can afford, because affordability is what HMRC will test. If the letter is a statutory demand or mentions a winding-up petition, take insolvency advice that week rather than relying on the call.
The return still has to go in on time, because late filing triggers its own penalties, which are a separate matter from the interest that builds on the unpaid tax. If the debt is too large for a TTP, or HMRC rejects your application, speak to a licensed insolvency practitioner about the alternatives before enforcement starts.
We checked the interest rates, the late filing penalties and the HMRC phone number on this page against GOV.UK on 10 November 2026.
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What to Do First If You Cannot Pay Corporation Tax
Before you ring HMRC, get the figures straight: the tax the company owes, whether the return behind it has been filed, and what the company can genuinely pay each month. HMRC will ask for all of them, and a plan agreed on a guess is an easy one to miss.
File Your Corporation Tax Return on Time
Filing late and paying late are two separate failures with separate consequences, so a company can be up to date on one and still exposed on the other. File on time and the bill still grows if it’s unpaid, because interest runs on unpaid tax whatever the filing position.
Pay on time but file late, and the fixed £200 penalties apply even though HMRC already has its money.
| If you file your return late | If you pay your tax late |
|---|---|
| £200 the day the return is late, another £200 at three months, then 10% of the unpaid tax at six months and again at twelve. Three late returns in a row raise each £200 to £1,000. | No fixed percentage penalty applies to late payment of standard Corporation Tax. Interest accrues daily on the balance at HMRC’s late payment rate instead. |
| If a return is six months late, HMRC sends its own estimate of the tax due, a determination. You cannot appeal it, and the only way to replace it is to file the actual return. | HMRC can pursue the debt through collection and enforcement action, up to a winding-up petition. |
Contact HMRC Before Enforcement Starts
For Corporation Tax, GOV.UK lists one payment problems number, 0300 200 3840, and there’s no separate line for calling before the deadline. Ring once you can see the shortfall coming. Interest starts the day after the due date either way, but a company that gets in touch first is negotiating before HMRC starts chasing rather than after.
Before you call, list everything the company owes HMRC, including VAT and PAYE. HMRC looks at the company’s whole tax position when it weighs a payment plan, so it’s better that it hears about other arrears from you than finds them itself.
Work Out What You Can Afford to Pay
HMRC will ask what the company can afford each month, so work that figure out before you call, and have these to hand:
- the company’s 10-digit Unique Taxpayer Reference (UTR) and payment reference;
- the exact amount owed and the payment deadline;
- the reason for the shortfall;
- how much you can pay immediately;
- the monthly payment you’re proposing;
- current income and expenditure, and a short cash-flow forecast;
- any other HMRC liabilities, including VAT and PAYE;
- available assets, savings or finance you could draw on;
- evidence that future tax liabilities can be paid on time.
Check the bill is right. A Corporation Tax bill is worked out on the profit of a period that ended nine months before it’s due, so it can arrive after the business has already turned down. That’s most painful where a strong year has been followed by a weak one: the profit that created the bill has gone, but the bill itself hasn’t moved.
Under the loss relief rules, a company that makes a qualifying trading loss can often carry that loss back against the profits of the previous accounting period, and in some circumstances further back, which can reduce, and occasionally cancel, the Corporation Tax due on the earlier period.
Whether that applies depends on the type of loss, the periods involved and strict time limits for making the claim, so it’s a question for your accountant rather than one to settle yourself.
The claim can only be made once the loss-making year has ended, which may be after the tax falls due, so if a loss is coming, say so when you propose the plan and ask your accountant to make the claim as soon as the figures allow.
Can You Get a Corporation Tax Time to Pay Arrangement?
HMRC can agree a Corporation Tax Time to Pay arrangement, but only on a plan it judges affordable, which in practice means the company can clear the arrears while still paying its new tax bills on time. You apply by ringing 0300 200 3840, explaining why the company is short and proposing a monthly amount, so go into the call ready on these points:
- Be realistic. Offer what the company can keep paying for the whole term, even if it’s less than you think HMRC would like. A plan that breaks after a few months leaves the company owing the full balance again, with HMRC free to resume collection.
- Put every tax arrear on the table. HMRC looks at the company’s whole compliance record and can cover more than one tax in a plan, but arrears of VAT or PAYE alongside the Corporation Tax make an affordable plan much harder to build.
- File the return, or have a firm figure for the tax. HMRC will not normally agree a TTP until it knows the amount owed.
- Call before the deadline where possible. Getting in touch early gives you time to prepare the figures properly, rather than answering for the debt once HMRC is already chasing it.
HMRC doesn’t publish a standard length for a Corporation Tax payment plan. It checks affordability case by case and wants more evidence the longer the term you ask for, and if no plan can be agreed it will ask for the full amount.
HMRC also expects the company to reduce the debt as far as it can first, for example by selling stock, vehicles or shares, and it may ask directors to put in personal money, arrange a loan or extend credit to the company. Decide before you ring what you are and aren’t prepared to offer, so you’re not answering that question for the first time on the call.
Interest keeps running on the balance for as long as the plan lasts, but while the company keeps to its agreed payments and other conditions, HMRC normally holds off recovering the debt the arrangement covers.
What Happens After You Miss a Corporation Tax Payment?
For most companies, Corporation Tax falls due 9 months and 1 day after the accounting period ends. Large companies, those with profits over £1.5 million, pay in quarterly instalments instead, at a different interest rate. Once the date passes, two things start together: interest on the unpaid balance, and HMRC’s right to pursue it.
The Company Tax Return (form CT600) is not due until 12 months after the period ends, so the payment deadline comes three months before the filing one, and a company can owe the tax before it has filed the return that shows it.
HMRC Enforcement Timeline
| Stage | What can happen |
|---|---|
| Day 1 after the deadline | Interest accrues daily on the unpaid balance at HMRC’s late payment rate (7.75% a year from 9 January 2026, 8.00% from 24 November 2026). It doesn’t compound, and it’s interest, not a penalty. |
| Reminders and contact | HMRC issues payment reminders and refers the debt to its debt management team. A call at this stage can still lead to a Time to Pay arrangement. |
| Collection action | If the debt is left unpaid, HMRC can instruct debt collection agents, recover the tax directly from your bank account, or take control of company goods to sell. |
| Formal insolvency action | Where the tax is still unpaid and ignored, HMRC can serve a statutory demand and, ultimately, present a winding-up petition. |
HMRC doesn’t publish a fixed timetable for these stages, and the pace varies with the size of the debt, the company’s compliance history and how you engage. GOV.UK says HMRC will tell you before it takes any of these steps.
Taking money from the bank account and taking goods are powers HMRC uses in England, Wales and Northern Ireland, and costs such as auction fees are normally added to the debt.
A statutory demand gives the company three weeks to pay or come to terms, after which the unpaid demand can be used as evidence that it cannot pay its debts, the ground for a winding-up petition. HMRC does not have to serve a demand first, though, so calling at the reminder stage is how you deal with the debt before HMRC has gone to court.
Late Payment Interest and Penalties
Late payment interest on Corporation Tax is worked out daily at HMRC’s late payment rate and never charged on interest already added, so you can estimate it yourself: multiply the unpaid tax by the annual rate, then by the number of days late, and divide by 365. At the 8.00% rate that applies from 24 November 2026 (7.75% before that), that comes to roughly:
- £10,000 unpaid for 90 days: about £197 in interest.
- £25,000 unpaid for six months: about £1,000.
- £50,000 unpaid for a full year: about £4,000.
HMRC’s own figure will differ a little where the rate changed during the period, so treat these as a guide rather than an exact sum. The late payment interest you pay HMRC is deductible for Corporation Tax, which shaves a little off the true cost, though not enough to make an unpaid tax bill a sensible way to borrow.
Can Unpaid Corporation Tax Lead to Insolvency?
Unpaid Corporation Tax can be a sign of insolvency, but on its own it doesn’t settle the question. A single missed payment in a business that’s otherwise keeping up with its bills is a timing problem, and Time to Pay exists for exactly that.
Arrears across several taxes, overdue suppliers and no credible way to meet debts as they fall due point to something else: the company may be insolvent, and a payment plan can’t fix that, because it only spreads a debt the company has no way of clearing.
If the company has been behind on Corporation Tax for over a year, is behind on VAT and PAYE as well, and you’re choosing each month which creditors to pay, the question is no longer how to pay this tax bill but whether the company should still be trading. A licensed insolvency practitioner can tell you whether it can survive with its debts restructured or needs a formal insolvency procedure.
Where HMRC ranks. Corporation Tax does not share the secondary preferential status that VAT and PAYE have had since 1 December 2020, which covers the income tax and employee National Insurance a company deducts from wages but not employer’s National Insurance.
In a liquidation it’s an ordinary unsecured claim in the creditor priority order, behind HMRC’s VAT and PAYE claims and alongside trade suppliers, and what it recovers depends on the assets left. That changes where HMRC sits in the queue, not how hard it pursues the debt before then, since HMRC still serves statutory demands and petitions over unpaid Corporation Tax.
Director duties. Once the company is insolvent or close to it, a director’s duty starts to shift toward the interests of creditors. In practice that means protecting company assets, not taking on credit you may not be able to repay, and avoiding any step that worsens the position for creditors as a whole. Our guide on when to stop trading sets out where that line sits.
If you’ve given a personal guarantee, a failing business reaches you personally as well, because the guarantee is your own promise and stands apart from what the company owes HMRC.
Striking off won’t end the debt. You can apply to strike the company off the register, but every creditor, HMRC included, must be sent a copy of the application, and HMRC can object while tax is owed. Until the company is dissolved it still has to file its returns and deal with what it owes.
Options If You Still Cannot Pay the Corporation Tax Debt
Which option fits depends on what kind of problem the unpaid tax turns out to be:
- A temporary shortfall in a viable business that can afford its future taxes: get the return filed and ask HMRC for Time to Pay.
- A bill you suspect is wrong or too high: speak to your accountant first about loss relief or corrections before agreeing to pay a figure that may come down.
- A viable business but several creditors you can’t pay: this is the point for restructuring advice, which may include a Company Voluntary Arrangement, a formal deal with creditors supervised by an insolvency practitioner, or other alternatives where they fit.
- No credible path back to solvency: take insolvency advice urgently rather than letting the position drift.
- A statutory demand or winding-up petition already served: get legal and insolvency advice straight away. A statutory demand gives the company three weeks, and once a petition is presented the timetable is set by the court rather than by you.
If the debt is large, runs back over more than one year or is part of a wider cash-flow crisis, speak to a licensed insolvency practitioner. Through Company Debt, the first call is with one, and a free, confidential consultation will tell you whether a TTP is realistic or whether the company needs a different route.
Frequently Asked Questions About Unpaid Corporation Tax
How long can you owe HMRC Corporation Tax before they take action?
HMRC publishes no timetable for this. Interest starts building on the unpaid balance the day after the deadline, and from there HMRC can move through reminders and collection action to a winding-up petition, at a pace that depends on the circumstances rather than a fixed calendar.
The longer the debt is left, the higher the balance and the less room there’s to negotiate. Late payment itself carries interest rather than a fixed penalty; the fixed penalties apply where the return is filed late.
Is Corporation Tax a preferential debt in insolvency?
No. Corporation Tax is an unsecured debt that ranks equally with trade creditors and other unsecured claims. VAT and deducted PAYE have had preferential status since 1 December 2020, but HMRC’s Corporation Tax claim gets no priority in the distribution to creditors.
Can HMRC wind up my company for unpaid Corporation Tax?
Yes. Under section 123 of the Insolvency Act 1986, a company may be treated as unable to pay its debts where a creditor owed more than £750 serves a statutory demand and the debt remains unpaid for three weeks.
This doesn’t mean HMRC routinely petitions over every £750 debt, but the legal threshold is low and unpaid Corporation Tax shouldn’t be ignored on the assumption the sum is too small to matter. Being unsecured does not stop HMRC petitioning. It only affects how much HMRC recovers if the company is wound up.
Am I personally liable for unpaid Corporation Tax?
Not directly. Corporation Tax is the company’s debt and does not pass to its directors automatically. HMRC can make a director personally liable only in specific cases, such as a joint and several liability notice where there has been tax avoidance, evasion or repeated insolvency.
The main personal risk linked to unpaid tax is wrongful trading under section 214 of the Insolvency Act 1986: if the company enters insolvent liquidation (or administration, under section 246ZB), a court can order a director to contribute where they kept trading after they knew, or ought to have concluded, that insolvency could not be avoided.
If the company fails, the Insolvency Service can also seek to disqualify a director, and leaving tax unpaid while other creditors are paid is one of the kinds of conduct it considers.
Other routes sit outside the tax debt itself. A personal guarantee given to a lender or landlord is a separate contractual liability that stands regardless of HMRC’s claim. Fraudulent trading (deliberate dishonesty) or misfeasance (a breach of duty causing the company loss) may also expose a director, but only where that conduct is present, not as a default result of owing Corporation Tax.
What happens to interest and penalties during a Time to Pay arrangement?
Interest keeps running for as long as the arrangement lasts, and there’s no late payment penalty on standard Corporation Tax for the plan to suspend.
While the company keeps to the agreed instalments, HMRC holds off enforcement, but if an instalment is missed HMRC can cancel the arrangement and resume collection and enforcement action on the full outstanding balance.
Will HMRC accept a longer Time to Pay if my company has been hit by something specific?
Possibly. HMRC sets no standard term and decides each plan on affordability, so a company that can point to a one-off cause, such as a major customer failing, and show in a forecast how it recovers has a stronger case for a longer plan than one that cannot. Expect HMRC to ask for documents to back both.
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