HMRC corp tax Bill

Corporation Tax Debt

If you feel your business cannot maintain corporation tax payments or has already failed to do so, action is imperative to securing the best outcome for your company. A pro-active approach will show HMRC that you are tackling your financial issues head on, rather than ignoring your concerns. This response will likely serve as one of the most valuable assets you have in HMRC negotiations.

What Happens?

If you have established an inability to pay tax, contacting HMRC is of utmost importance, to make them aware of the situation and your willingness to remedy this. The progression after this point will depend on your position as a company, your HMRC file and their confidence in you as a debtor.

Once contact has been made by a Director or Company Accountant HMRC will assess your company and their relationship with it. They will analyse the status of your taxes and how regularly you have defaulted on payments in the past. If this is the first instance of your company struggling, they are likely to be more lenient. Whereas if your company has prior cases of missed or late payments, they may be more likely to pursue different options for repayment.

Can I be fined?


Non-payment of corporation tax carries a fine and it is important to file company tax returns when due, regardless of your ability to make the payment in full.

Your company may receive a fine or penalty charge for failing to file your company tax return or filing this after the deadline.

What can I do?

If your company is failing to pay its corporation tax, there is a high chance this may be due to current or impending insolvency. HMRC debt of any kind can be a tell-tale sign of the gravity of a company’s financial situation.

If a company is found to be insolvent and as a result cannot pay its due tax, HMRC will investigate the Directors, assessing any dividends they have taken and the salary they have received. If they are found to have taken dividends when the company was in fact insolvent, there may be repercussions.

If you must liquidate the company, there may be personal financial issues which have to be rectified during this process or even prior to proceedings. If you are unsure of your financial situation please get in touch with our team for sound, practical advice.

TTP (Time to Pay) Arrangement

These are agreements entered into by both HMRC and the company themselves. This agreement is a structured payment of any tax arrears, agreed over a period of 12 months (maximum).

There are several factors which may affect a business’s likelihood of obtaining or qualifying for application of a TTP.

Compliance is a major factor. HMRC is likely to assess a company’s file to date. They are more likely to reward a company which has consistently complied with tax obligations and poses a higher potential of meeting the terms of agreement.

Market or business nature are also likely to impact a company’s success in securing a TTP. Industries which are considered more volatile will represent a greater risk to HMRC, limiting the chances of eligibility.

Finally, as with most payment plans if a company has proven a reliance on TTP before, it may negatively impact a repeat offer of a similar agreement.

To negotiate a TTP companies must approach HMRC with ample evidence supporting their ability to honour the proposed obligations. Financial information relating to expenses, and income will enable HMRC to gain a better insight into the financial position of a company and whether they feel the company are able to quality for a TTP.

Communication is key when attempting to negotiate a TTP and while there are no set criteria that guarantee acceptance, providing sufficient evidence and being pro-active with your approach will benefit the process.

If there is an overdrawn Director’s Loan Account associated with the business HMRC will not consider an application for a TTP until this has been cleared.

Can HMRC close my Company?

In short, yes.

If they have pursued all avenues without avail (warning letters, statutory demands, etc.) they will continue with a Winding Up Petition, and any subsequent Order as a result. This forces your company into Compulsory Liquidation and means the company is struck off and must cease trading permanently. As a major creditor to businesses throughout the UK, HMRC is responsible for the majority of all Winding up Petitions served. This means there, process for doing so is incredibly streamlined, so acting fast and appropriately can often work in your favour.

What are the Risks?

Directors, for the most part are covered by the boundaries which are set as part of the Limited Company. This means that in the majority of cases, company debts and personal debt are regarded as two very separate areas. However, in some cases Directors can find themselves liable for company debt. For example, if they are found to have wrongfully traded once a company was insolvent, they would risk liability for the debts accrued during this period of trading.

Tax debts are often unique, so advice is best given once an expert has a complete picture of the circumstances a company finds itself in. If you have concerns about your company’s tax debts or its inability to pay tax, please speak to us. We are here to help, and our expert teams have ample experience and knowledge in dealing with these situations.