Can’t Pay Your Corporation Tax Bill? Options Explained
If your company can’t pay its Corporation Tax bill on time, ignoring it is the worst option — HMRC has genuine routes to help businesses in temporary difficulty, but only if you act before the deadline passes. This guide from Filing Accounts UK explains exactly what happens if you can’t pay, what a Time to Pay arrangement involves, and what other options exist, using only verified facts from official HMRC guidance.
At Filing Accounts, we help UK limited companies manage Corporation Tax payment difficulties. You can find official guidance directly on GOV.UK: Pay your Corporation Tax bill.
What Happens If You Don’t Pay on Time?
Corporation Tax is normally due nine months and one day after the end of your company’s accounting period. If you don’t pay by then:
- Interest starts accruing immediately — from the day after the due date, not from when you eventually contact HMRC or pay.
- HMRC’s late payment interest rate for Corporation Tax is tied to the Bank of England base rate plus a statutory margin, and is reviewed periodically — always check the current published rate on GOV.UK before estimating what you owe.
- If your Company Tax Return (CT600) is also late, separate late filing penalties apply on top of any interest.
- If a return is more than 6 months late, HMRC can issue a “tax determination” — its own estimate of what’s owed — which then stands unless and until you file the actual return.
- Continued non-payment can ultimately lead to enforcement action, including a winding-up petition, which typically freezes the company’s bank accounts once advertised.
Not being able to pay does not mean you have to stop trading — but it does mean you need to act. HMRC is generally far more sympathetic to businesses that contact them proactively than to those it has to chase.
Option 1: Set Up a Time to Pay (TTP) Arrangement
A Time to Pay arrangement is HMRC’s formal instalment plan for businesses experiencing temporary — not permanent — financial difficulty. Instead of paying the full Corporation Tax bill in one go, you repay it in agreed monthly instalments.
Key Facts About Corporation Tax Time to Pay Arrangements
- Typical length: Usually 6–12 months, though longer arrangements are possible for larger debts with stronger evidence of viability and manager-level approval.
- How to apply: Corporation Tax TTP arrangements must be arranged by phone via HMRC’s Business Payment Support Service — they cannot currently be set up online, unlike some Self Assessment plans.
- Interest still applies: A TTP arrangement doesn’t cancel interest — it continues to accrue on the outstanding balance from the original due date until it’s fully paid. What it typically avoids is further late payment penalties and enforcement action, provided you keep to the agreed schedule.
- You must stay current: Any other tax obligations falling due during the arrangement — VAT, PAYE, future Corporation Tax — must still be paid on time, or HMRC can cancel the arrangement.
- Multiple periods can be combined: If you have Corporation Tax arrears from more than one accounting period, these can usually be combined into a single arrangement with one monthly payment.
What HMRC Will Ask For
To assess a Corporation Tax TTP proposal, HMRC typically wants:
- Your company name, Unique Taxpayer Reference (UTR), and registered address
- The amount owed and when it became due
- A clear explanation of why the company can’t pay — for example, a late-paying customer or a temporary drop in trade
- Up-to-date management accounts and a cash flow forecast
- A realistic monthly repayment amount you’re confident the company can sustain
HMRC will also typically check whether the company has an overdrawn director’s loan account or has paid dividends that look excessive relative to available profits — if so, it may expect these to be addressed before agreeing a TTP arrangement.
Only offer what your company can genuinely afford. Proposing a repayment you can’t sustain is worse than a modest, realistic one — if you miss a TTP instalment, HMRC can cancel the arrangement and move straight to enforcement.
Option 2: A Company Voluntary Arrangement (CVA)
If Corporation Tax arrears sit alongside other debts the company can’t manage through a simple TTP, a Company Voluntary Arrangement (CVA) may be worth considering. A CVA is a formal, legally binding agreement with creditors — including HMRC — that can secure extended repayment terms well beyond what a standard TTP arrangement would allow. This route requires a licensed insolvency practitioner and creditor approval, and is generally more appropriate where the company has multiple debts rather than Corporation Tax arrears alone.
Option 3: Creditors’ Voluntary Liquidation (CVL)
If the company is genuinely insolvent — unable to pay its debts, including Corporation Tax, as they fall due — a Creditors’ Voluntary Liquidation allows directors to close the company in an orderly, legally compliant way. Outstanding debt is written off as part of the process, and the company is ultimately removed from the Companies House register. This is a last-resort option once the business is no longer viable, not a way to avoid a manageable tax bill.
A Word of Warning: Trading While Insolvent
An unpaid Corporation Tax bill doesn’t automatically mean you must stop trading — if you’re actively engaging with HMRC through a TTP arrangement, the company can continue operating as normal. However, if the company is genuinely insolvent (unable to meet its debts as they fall due generally, not just this one tax bill), continuing to trade regardless can expose directors to personal liability for wrongful trading. If you’re unsure which category your company falls into, this is worth clarifying with a licensed insolvency practitioner before deciding how to proceed.
Your Options at a Glance
| Option | Best for | Typical length |
|---|---|---|
| Time to Pay (TTP) | Temporary cash flow difficulty, viable business | 6–12 months (sometimes longer) |
| Company Voluntary Arrangement (CVA) | Corporation Tax arrears plus other debts, business still viable | Typically several years |
| Creditors’ Voluntary Liquidation (CVL) | Company is insolvent and no longer viable | N/A — company is closed |
How to Give Yourself the Best Chance of a Successful TTP
- Contact HMRC before the deadline, or as soon as possible afterwards — HMRC looks far more favourably on businesses that get in touch early.
- Know exactly what you owe by checking your Business Tax Account, which updates daily.
- Prepare a cash flow forecast and a breakdown of monthly income and expenses before you call.
- Propose what you can actually afford — not what you hope to manage.
- Keep all future tax obligations current once the arrangement is in place, since falling behind again can cause HMRC to cancel it.
Common Mistakes to Avoid
Ignoring the Bill and Hoping It Resolves Itself
Interest accrues from the original due date regardless of whether you’ve been in touch with HMRC — waiting only increases what you eventually owe.
Proposing an Unaffordable Repayment Plan
Offering more than you can sustain, just to get the arrangement agreed, often ends with a missed payment and the arrangement being cancelled — putting you in a worse position than before.
Assuming a TTP Cancels Interest
A Time to Pay arrangement spreads the payments; it does not stop interest building on the outstanding balance from the original due date.
Letting Other Tax Obligations Lapse During a TTP
Falling behind on VAT or PAYE while a Corporation Tax TTP is in place is one of the most common reasons an arrangement gets cancelled.
Continuing to Trade While Genuinely Insolvent
If the company can’t pay its debts generally, not just this tax bill, continuing to trade regardless can expose directors personally to wrongful trading claims.
Frequently Asked Questions
Can I set up a Corporation Tax payment plan online?
Not currently. Corporation Tax Time to Pay arrangements must be set up by phone via HMRC’s Business Payment Support Service, unlike some smaller Self Assessment plans.
Does a Time to Pay arrangement stop interest?
No. Interest continues to accrue on the outstanding balance from the original due date until it’s paid in full — a TTP arrangement typically avoids further penalties and enforcement, not interest.
How long can a Corporation Tax TTP arrangement last?
Typically 6 to 12 months. Longer arrangements are possible for larger, more complex debts, but require stronger evidence of affordability and manager-level approval.
Will HMRC check my director’s loan account before agreeing a TTP?
Often, yes. HMRC may expect an overdrawn director’s loan account or excessive dividends to be addressed before agreeing to a Time to Pay arrangement.
What happens if I miss a TTP instalment?
HMRC can cancel the arrangement and resume enforcement action, which may include a winding-up petition in serious cases.
Can I still trade if I can’t pay my Corporation Tax bill?
Usually yes, if you’re engaging with HMRC and the company remains solvent overall. If the company is genuinely insolvent, continued trading can expose directors to personal liability.
Need Help With Corporation Tax Arrears? Talk to Filing Accounts UK
An unpaid Corporation Tax bill is far easier to manage with an early, realistic plan than after HMRC has started enforcement action. At Filing Accounts, we help UK small businesses stay on top of Corporation Tax deadlines and prepare for conversations with HMRC when a payment difficulty arises.
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