If your limited company cannot pay its Corporation Tax bill on time, the most important thing is to act early.

A missed Corporation Tax payment does not automatically mean the company will be closed, but HMRC can charge interest and pursue recovery if the debt remains unpaid.

The right solution depends on whether the company has a temporary cash-flow problem or whether it is struggling to meet its debts more generally.

If the Corporation Tax has been paid but the return itself is overdue, see our guide to Company Tax Return late filing penalties.

💡 Quick Answer

If your company cannot pay Corporation Tax, confirm exactly what is owed and contact HMRC as soon as possible.

HMRC may agree a Time to Pay arrangement allowing the debt to be repaid in instalments where the company can afford the payments and remain up to date with future tax liabilities.

If the business cannot afford a realistic repayment plan, directors should consider whether wider restructuring or insolvency advice is needed.

what to do if you cant pay your corporation tax bill

What Should You Do If You Cannot Pay Corporation Tax?

The worst option is to ignore the debt.

If you know the company cannot make the payment, you should:

confirm how much Corporation Tax is due;
make sure the Company Tax Return is dealt with correctly;
review the company’s cash position;
establish what the business can realistically afford;
contact HMRC about payment options; and
consider the wider solvency of the company if other debts are also going unpaid.

HMRC allows businesses that cannot pay a tax bill in full to discuss payment arrangements based on their financial circumstances.

When Is Corporation Tax Due?

For companies with taxable profits of up to £1.5 million, Corporation Tax is normally due 9 months and 1 day after the end of the accounting period.

Larger companies can be required to pay Corporation Tax by instalments instead. The £1.5 million threshold relates to taxable profits, not turnover or revenue.

This distinction matters because the payment deadline can vary for larger companies.

Should You Still File the Company Tax Return If You Cannot Pay?

Yes.

The obligation to file the Company Tax Return is separate from the obligation to pay the tax.

If the company cannot afford the Corporation Tax bill, you should still ensure the return is filed correctly and on time.

Late filing can create additional penalties even where the tax itself is already overdue.

What Happens If Corporation Tax Is Paid Late?

HMRC can charge late-payment interest on unpaid Corporation Tax.

This is separate from the penalties that can apply when a Company Tax Return is filed late.

It is therefore useful to distinguish between:

late tax payment — which can result in interest; and
late filing of the Company Tax Return — which can result in filing penalties.

The longer the debt remains unresolved, the more expensive it may become.

Can You Pay Corporation Tax in Instalments?

Potentially.

HMRC may agree a Time to Pay arrangement, allowing Corporation Tax debt to be repaid through monthly instalments.

To set up a payment plan, HMRC may ask for:

the relevant Corporation Tax reference;
UK bank details;
details of the company’s income;
details of company expenditure; and
an explanation of what the business can realistically afford.

For a full explanation of the arrangement itself, see our HMRC Time to Pay guide.

For the application process, see how to apply for HMRC Time to Pay.

What Will HMRC Want to Know?

HMRC will want to understand why the company cannot pay and whether the proposed repayment arrangement is sustainable.

Directors should be prepared to explain:

why the Corporation Tax debt arose;
how much can be paid immediately;
what monthly repayment is affordable;
the company’s income and expenditure;
whether there are other HMRC arrears;
whether suppliers or lenders are also unpaid; and
how future tax liabilities will be kept up to date.

A clear and realistic proposal is much stronger than simply asking HMRC for more time.

Can HMRC Refuse a Corporation Tax Payment Plan?

Yes.

A Time to Pay arrangement is not guaranteed.

HMRC may refuse a proposal where it is not satisfied that:

the instalments are affordable;
the company can remain compliant going forward;
sufficient financial information has been provided; or
the proposed repayment period is reasonable.

If the business cannot afford a realistic repayment plan, the issue may be more serious than a temporary shortage of cash.

What If the Company Has Other HMRC Arrears Too?

Corporation Tax debt often does not exist in isolation.

A company may also be behind with:

VAT;
PAYE and National Insurance;
CIS liabilities; or
other HMRC payments.

If several tax liabilities are becoming difficult to pay, see our broader HMRC Tax Debt guide.

That page explains the wider repayment, restructuring and insolvency options available to limited companies with HMRC arrears.

What Happens If Corporation Tax Debt Is Ignored?

HMRC can pursue unpaid Corporation Tax through its normal debt-recovery processes.

Depending on the circumstances, this can ultimately include:

payment demands;
debt collection activity;
enforcement action;
court proceedings; and
insolvency action against the company.

Ignoring correspondence from HMRC usually reduces the number of straightforward options available.

Can HMRC Use Debt Collectors for Corporation Tax?

Yes.

HMRC may use approved debt collection agencies to contact businesses about unpaid liabilities.

If your company has been contacted, see our guide to HMRC Debt Collection Agencies.

The underlying tax debt remains owed to HMRC even where an external agency is involved.

Can HMRC Wind Up a Company Over Corporation Tax Debt?

Potentially.

Where significant Corporation Tax remains unpaid and no satisfactory solution is agreed, HMRC can ultimately pursue insolvency action.

This may include a winding-up petition seeking to place the company into compulsory liquidation.

If your company has already received serious enforcement correspondence, acting quickly is important.

What If the Company Cannot Afford a Time to Pay Arrangement?

This is the point where directors should look beyond the individual tax bill.

Warning signs of a wider problem include:

Corporation Tax arrears recurring each year;
VAT or PAYE also being overdue;
suppliers being paid late;
borrowing being used to repay existing debt;
failed HMRC payment arrangements; or
insufficient cash to meet normal liabilities as they fall due.

If the company can repay historic Corporation Tax only by creating new arrears elsewhere, the underlying business may require restructuring or closure.

What Insolvency Options Are Available?

Where Corporation Tax debt forms part of wider financial distress, directors may need to consider formal options.

Company Voluntary Arrangement

A Company Voluntary Arrangement may allow a viable company to restructure unsecured debts through an agreed proposal with creditors.

HMRC can be a creditor within a CVA.

Company Administration

Company Administration may sometimes be appropriate where a viable business needs protection from creditor action while restructuring or a sale is pursued.

Creditors’ Voluntary Liquidation

Where the company is insolvent and there is no realistic prospect of recovery, a Creditors’ Voluntary Liquidation may provide an orderly way to close the business.

Can Directors Become Personally Liable for Corporation Tax Debt?

Normally, Corporation Tax owed by a limited company remains a liability of the company.

It does not automatically transfer to the directors simply because the company cannot pay.

However, personal consequences can arise in specific circumstances involving misconduct, misuse of the company structure or certain statutory provisions.

For most directors, the immediate priority is to assess the company’s financial position and ensure that their duties are being properly observed if insolvency is likely.