If you can’t pay your corporation tax bill, or are in arrears with your payment, the fundamental piece of advice is to maintain regular communication with HMRC.
If it’s your first time being late then the place to contact is the HMRC Business Payment Support Service as they will assess your case on its own merits.
This article will explain in detail your options regarding your debt, and HMRC’s potential courses of action.
What happens if I Can’t Pay My Corporation Tax on Time?
If you or your accountant has already spoken to HMRC, what follows will depend on how much confidence they have in your ability to pay and the status of your cash flow.
In other words, if this is the first time you’re late then they may react differently to how they would with a ‘repeat offender’.
It’s important to note that a ‘repeat offender’ may not just be related to company tax, but can also be affected by personal tax, such as income tax, or be relevant to the same taxable period as the corporation tax liability.
For ‘repeat offenders’, it’s important that you call the office that contacted you – there’s no point in contacting the HMRC Business Support Service now. If all communications with HMRC have been exhausted and you have tried a time to pay arrangement then you need to seek specialist, professional help.
We can help with this situation by providing expert advice on all varieties of corporation tax liability and tax debt.
Are There Any Fines or Penalties if I Can’t Pay Corporation Tax?
Yes, there are fines for not paying corporation tax. Make sure you file your company tax return on time even if you can’t make the full corporation tax debt that is due.
If you don’t file your return on time you may be charged a fine or penalty.
For exact rates, see our full article on HMRC Tax Penalties and Late Payment Interest.
My Ltd Company is Insolvent and I Can’t Make My Tax Payment. Does This Matter?
Finding yourself in the situation where you cannot pay corporation tax debt may be a particularly relevant warning indicator for insolvency, along with failure to pay PAYE or being unable to pay VAT arrears.
HMRC have specific guidelines for investigating the remuneration of directors, and their salary, especially where directors have taken dividends when the company is insolvent.
The fact that you are having problems paying corporation tax may indicate that you have taken excessive dividends and HMRC may have the view that the money you paid yourself is, in fact, owed to them.
If you need to close down the company then there may be personal implications that need checking, such as an overdrawn director’s loan account. You should contact us first to get free advice on your unique tax debt situation.
Can I pay Corporation Tax in Instalments (Time to Pay Arrangement?)
It’s possible that they will accept a corporation tax time to pay arrangement, but you will be expected to demonstrate that the company can afford to repay the tax over a maximum of twelve months along with any other tax debt or tax liability that will be due within this taxable period.
Your company’s cash flow and financial status will also be considered before any payment plan is considered.
Be aware that if you have an overdrawn director’s’ loan account they will want this repaying immediately before any time to pay arrangement, or instalment payments, would be considered.
Will HMRC Take Me to Court if I’m Unable to pay Corporation Tax?
It depends on your situation. If you have exhausted HMRC’s patience then you need to act swiftly as they will not go away – they will want the tax.
The first stage is usually to send threatening letters, then they may try to prove the debt in law by pursuing it via the County Court. This will affect your company’s credit rating – although not yours personally.
They may also prove the debt via a statutory demand, which is more serious.
If you do not pay the tax debt in full or negotiate a settlement of the tax liability, after this point HMRC will wind up your company through the use of a winding up petition. This is also known as compulsory liquidation and will of course mean your company ceases trading permanently.
Will HMRC Wind Up My Company for not Making My Company Tax Payment?
Yes. HMRC has a duty to collect tax debt for the UK government. HMRC are also responsible for more winding up petitions than almost everyone else put together, so it’s important to keep this in mind when considering your intentions going forward.
Can Bailiffs Seize My Assets?
Yes. HMRC can seize assets, and because they do not have to prove the tax debt via the normal legal channels they can process this much faster.
This will never happen out of the blue, however, you will have received clear letters beforehand warning you of the escalating situation.
These will mention ‘Taking control of goods (distraint)’ or ‘Enforcement action’ both of which are HMRC’s terms for seizing goods in order to recoup money owed.
As a Company Director, Can I be Held Personally Liable?
In most situations, the limited company structure is there to create a clear boundary between personal and corporate debt. There are exceptions to this, however, which we explain more detail in our dedicated article on director’s personal liability.
Can You Provide Advice?
Yes. If you have corporation tax arrears and cannot afford to pay your tax debt, this means your company is insolvent. You are likely to need specialist help from licensed insolvency practitioners so please contact us: 08000 746 757.