One of the most stressful situations a business can face is not being able to meet its tax obligations, particularly Corporation Tax.
The latest data shows that Corporation Tax receipts are up, and many will already be anticipating a higher bill this year as a result of the changes to Corporation Tax rates in April this year.
Being unable to pay your tax bill is a scenario that many companies dread but is sometimes unavoidable due to cash flow issues or unforeseen circumstances.
What can you do if you find yourself unable to pay your Corporation Tax bill on time?
First and foremost, don’t ignore the issue. Tax liabilities won’t disappear if you ignore them; they’ll only get worse.
Penalties and interest for late payment start accruing immediately after the due date, making the problem more expensive to resolve the longer you delay.
Contact HMRC as Soon as Possible
The best course of action is to get in touch with HM Revenue and Customs (HMRC) as soon as you realise you won’t be able to make the payment.
They can discuss your specific circumstances and may offer options such as a Time to Pay arrangement.
This is essentially a formal agreement to pay your tax bill in instalments over a period of time. However, it’s worth noting that you’ll still incur interest on the unpaid balance.
Review your expenses
Take a hard look at your operating costs to see where cutbacks can be made, at least temporarily, to free up cash.
This might involve postponing some investments or negotiating better payment terms with suppliers.
Secure financing
Another option is to seek external financing to meet your immediate tax obligations. While this can be a quick way to resolve the problem, it’s essential to consider the long-term implications and costs of borrowing.
Seek professional advice
Speak to your accountant or tax adviser who can assess your financial situation and help you negotiate a viable payment plan with HMRC.
They can also help you identify areas where you might be able to make savings or improve cash flow to meet your tax obligations.
If you can’t pay your Corporation Tax bill, it’s crucial to act promptly and consult with professionals. This not only minimises penalties and interest but also shows HMRC that you’re proactive and committed to resolving the issue, which may work in your favour when negotiating payment plans.
Remember, you’re not alone; many businesses experience financial challenges at some point. The key is to address the problem head-on and seek appropriate guidance.
If you are concerned about an upcoming tax bill, please contact us.
This is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 20/10/23.