John A Waller
Reviewed 23rd April 2021.
Can’t Pay Corporation Tax
Year-End Accounting Deadlines
Corporation tax is an annual event that depends on the timing of your accounting year-end. Therefore, directors are required to insure their accountants prepare the required statements at the year-end. Please note, this is the director’s responsibility, and any failings of the accountant fall upon the director.
Once you have prepared the accounts, you will determine your company’s corporation tax liability. Therefore, delaying the financial accounts’ preparation to the last minute and encountering an unexpected high corporation tax bill, you may then be in a position whereby you cannot meet this corporation tax liability.
Directors must note, once you know you cannot pay the tax liability, not doing anything ensures HMRC will enforce payment. Please contact HMRC if you have a problem first.
Keeping contact with HMRC is imperative
Who must pay corporation tax?
Businesses who trade with the protection of a limited company remain charged with paying corporation tax on their trading profit, but not on losses. However, if you have previous losses retained in your limited company? Then you may carry the losses offset against profits reported.
HMRC require notification either way if your company trades profitably to determine your corpora\tion tax liability. Also, if a loss, so your company’s tax records are maintained.
Corporation tax applies only to:
- Limited company in the UK;
- Foreign companies with an office in the UK;
- a co-operative;
- Unincorporated associations.
Those companies with a limited status at the registrar of companies. However, it is not charged to sole traders, as they are taxed on their income.
Can’t Pay Corporation Tax – What Then? When you can’t pay a corporation on time and have mounting corporation tax arrears, act quick. Then make contact with a Licensed Insolvency Practitioner for company debt advice. Once overdue, HMRC will commence debt recovery, firstly with threatening letters, followed by enforcement action if you fail to connect.
Then they will proceed with a winding-up petition. So, avoid receiving a winding-up petition by acting swiftly for help.
As a director of a company in financial difficulties and unable to pay your l Corporation Tax. It remains therefore crucial to ensure that you deal with the problem. It will not go away. Interest and fines will mount up, leading to a visit from an HMRC bailiff.
Usually, when unable to pay your corporation tax, you can’t pay VAT options also need to be considered.
So act now. Consult with HBG Advisory 0800 612 5448, and then please arrange an online VIRTUAL meeting today. To deal with the problem. Various closure options exist, along with business rescue if you can’t afford to pay HMRC.
Contact the HMRC.
Once you have accepted you are unable to pay your Corporation Tax Bill on time or at all, then before the date payment is due, contact the HMRC. Ensuring you are dealing with HMRC company debt issues.
You need to speak with the Business Payment Support Service on 0300 200 3825.
If they then reject your request for help, please contact HBG Advisory for immediate assistance. We have many years of experience dealing with matters of tax. By contacting us, it does not infer that you are entering insolvency. Indeed, an important part of our brief is to act in a purely advisory capacity.
Can you Pay Corporation Tax by Installments?
The HMRC will listen to your request. You must ensure you have your facts and figures correct, ready for questions by the HMRC. Usually, they will inquire why your company is finding it difficult to pay the tax? Also, they will ask what effort have you performed to attempt payment. Finally, ensure your company can pay if asking for instalments. Do not agree if you are unable to agree to an acceptable payment plan. Seek help immediately from HBG Advisory.
Suppose the HMRC agrees to a Time to Pay arrangement. Monthly instalments then determine tax payments, up to usually 12 months. HMRC will agree with this when the company cannot pay now but has the ability to pay over 12 months, subject to its viability. HMRC will maintain the Time To Pay arrangement for tax liabilities if you do.
Ensure you keep to the plan on the set dates. If you fail? The HMRC will then petition to Wind Up the company.
Negotiating “Time to Pay (TTP)” with the HMRC.
Negotiate with HMRC to pay your tax bill. Though, it is wise to use an experienced firm to act for you.
However, negotiations work if you have a viable business and have not had previous failed talks in the past.
However, if you fail to pay or agree on an arrangement, they will begin enforcement to recover the debt.
- Earnings or pension directly;
- Instruct debt collectors;
- Apply to your bank for the money;
- Take possession of company assets and sell them;
- Apply to the courts for recovery;
- Wind the business up.
Not being able to pay HMRC due to the pandemic. requires you to contact the HMRC coronavirus (COVID-19) helpline..
As a Director, am I Personally Responsible for Corporation tax?
As a Company Director, you are a separate legal entity to your company. Therefore, directors personally are not liable for your company’s liabilities (unless you have given a personal guarantee). In insolvency, however, you may be liable if you trade wrongfully or fraudulently.
If involved in the knowing mismanagement of your company, as a company director, you may be personally liable, therefore, for money owed and not ranked in the normal mode of paying creditors.
So ensure you keep up to date with your company records and make every effort to pay your tax bills. Keep control of how your cash flows. If it helps change your accounting periods (Speak with your accountant for advice). Additionally, ask your accountant to produce management accounts monthly and explain them.
In conclusion, if you are a director, act responsibly.
Can I Delay my Companies Corporation Tax Payment?
During Coronavirus COVID29 Pandemic. HMRC appears to allow a level of empathy in helping small companies struggle.
As always with HMRC. When dealing with them, you should speak honestly and openly. The HMRC will help if advised. The earlier you approach and open dialogue, the better the response.
Insolvency – When you can’t pay Corporation Tax?
In the event your company is unable to pay its Corporation tax, and you have exhausted or your available options with the HMRC.
Then explore ways to clear HMRC debt?
Then it is time to sit down and look at your available options with a Licensed Insolvency Practitioner. Often referred to as an insolvency advisor.
At this point, directors need to be realistic and accept your company is insolvent.
Failing to pay HMRC and not seeking help
Failing to pay Corporation Tax will prompt HMRC to commence a well practised process for collection of the tax, so failing to pay means:
- HMRC first issues an initial letter to highlight that the tax remains unpaid;
- Failing to respond, then may trigger a bailiff attending on behalf of the HMRC.
- If you then fail to pay the debt or have no assets to remove, then a statutory demand may be issued, giving 21 days to pay.
- HMRC then file the winding-up petition at the Court. The Court will then advise you in writing of a hearing date, giving fourteen days notice.
- The date and issuing of the winding-up petition are advertised in the Gazette, allowing company creditors, and the world at large, to see the order. Additionally, the company bank will pick up the notice.
- Then your company bankers will freeze all transactions with your accounts fourteen days before your court presentation.
- It is usual to arrange a Barrister to attend on your behalf, via a solicitor, if disputed, to request an adjournment, so to gain additional time to prepare a defence. An expensive point to be at, though, and considered risky.
- Failing which, your company faces Compulsory Liquidation.
If HMRC is pursuing your limited company for payment on your previous year’s tax liability, and the business is now not performing. One alternative is utilising corporation tax losses.
If the company is struggling with cash flow, it is likely to mean it has acquired trading losses in the current accounting period. If your company remains liable for corporation tax from previous accounting periods and is now trading at a loss, then you may claim relief from corporation tax.
You claim loss relief by offsetting it against other gains or profits during the same accounting period. However, profits can offset tax loss against profits for the previous 12 months.
Therefore, due to the losses incurred in the current accounting period, if you can file your corporation tax returns, a tax refund from HM Revenue & Customs is possible.
Insolvency options for distressed companies
Suppose your company is financially distressed and unable at present to deal with its corporation tax liability along with other creditors. Then if your company is beyond rescue, consider closing the company formally with an insolvency procedure. Perhaps you may need advice on what an Insolvent Liquidation is and talk through the process in understandable terminology.
Can a Bailiff Force Entry to My Premises?
Saving bailiffs arrive acting as high court enforcement officers attending with a signed warrant authorised by a judge. Bailiffs have no legal authority to execute entry of commercial premises, nor remove any goods.
Court-appointed bailiffs cannot simply appear and then force entry. They are permitted to gain access having entered previously while then listing goods to be removed if payment is not obtained.
For further detail, please read ‘Bailiff’s powers with a Ltd Company‘
CVA and Corporation tax
Will I lose out on tax if I take out a CVA?
Proposing a Company Voluntary Arrangement CVA remains a job that needs serious input to secure approval from your company creditors.
A company proposing taking out a CVA has accumulated tax trade losses. The continued accessibility of losses in future periods remains a crucial part of the CVA’s successful execution.
Assuming that the Company continues to trade throughout the CVA process, its undiminished trading losses remain transferable to future profits from the same trade.
As the HMRC is often a major creditor. When a company enters insolvency, then why is HMRC the biggest business creditor?
HBG Advisory licensed Insolvency Practitioners will help you explore the available options to you. Ensuring resolution, your company corporation tax commences as soon as you make contact. STOP CREDITOR USING PRESSURE TODAY!
The Team at HBG Advisory