Realising you can’t pay your Corporation Tax bill is a horrible feeling. Your stomach sinks, you start running the numbers in your head, and panic slowly creeps in. If this is where you find yourself, take a breath. You are not the first owner who couldn’t pay their Corporation Tax bill, and you won’t be the last. More importantly, there are options. 

This guide sets out what happens when you cannot pay Corporation Tax on time, the options available, and the steps you should take immediately. 

What happens when Corporation Tax isn’t paid on time

Corporation Tax is usually due nine months and one day after the end of your company’s accounting period. The moment that the deadline passes, HMRC begins treating the amount as late. There’s no grace period.

Interest on overdue tax

HMRC charges interest from the day after the payment deadline. This is automatic, and interest will continue to build until the full amount is settled. 

And yes, that still applies even if you’re in the middle of negotiating a payment plan with HMRC. So the longer you wait to act, the more you’ll owe them. 

Potential penalties

There’s no separate penalty for paying Corporation Tax late, but you can still be penalised if your Company Tax Return is late. HMRC issues fixed penalties that increase the longer the return is overdue. At six months late, HMRC can estimate what you owe and add a 10% penalty to that amount. If the return reaches 12 months late, that 10% penalty can be charged again.

Many businesses with Corporation Tax arrears end up with these penalties because late filing and late payment often happen together. It’s always worth filing the return on time, even if you can’t pay straight away.

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Is there a legal way to reduce your Corporation Tax bill?

Before speaking to HMRC about payment options, it’s worth checking whether your Corporation Tax bill can be reduced legally. A good Limited Company accountant (like Crunch!) can help you make sure you’re claiming any reliefs, allowances, or trading losses properly. That way, you’re not paying a penny more than you have to.

Your company made a loss 

If your company made a loss during the accounting period, you may not owe any Corporation Tax at all. You still need to file a return, but you can notify HMRC that no payment is due. Want more information? Check out our article “Corporation Tax loss carry back explained” for more information.

You have unused losses to carry forward or back

Trading losses from previous years can sometimes be offset against profits in the current or prior year. This can lower or even cancel your Corporation Tax bill. Professional advice is often useful to ensure losses are applied correctly.

You could use the Corporation Tax Group relief

If your company is part of a group of companies, it may be possible to offset profits against losses from another company within the same group. This is called Corporation Tax Group relief and can reduce the overall tax liability of the group. Our advice, though, is to make sure you work with accountants who specialise in Corporation Tax (like Crunch) to make sure it’s applied correctly. 

You are entitled to a relief you have not yet claimed

There are various reliefs and allowances built into the system. They should never be used to avoid paying tax you genuinely owe, but if they were overlooked when HMRC calculated your liability, claiming them can reduce your bill legally.

Done all that already? Well, read on to find out your other options if you can’t pay your Corporation Tax bill.
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So, what should you do if you still can’t pay?

If you already know you can’t pay your Corporation Tax bill, you should call HMRC as soon as possible. The sooner the better. Preferably before the payment deadline. The earlier you call, the more options HMRC can offer. Waiting until the interest has mounted or recovery action has started just makes the situation harder. 

Who should you call if you can’t pay your Corporation Tax?

For general Corporation Tax questions about payment, you should call 0300 200 3410. This is the general HMRC Corporation Tax enquiry line and is open Monday to Friday, 8am to 6pm. For payment issues, you should call 0300 200 3840. The lines are open Monday to Friday, 8am to 6pm. 

What do you need before calling?

Before calling, it’s best to gather:

• Your ten-digit Corporation Tax Unique Taxpayer Reference.
• Your company name and registered address.
• Details of the amount of Corporation Tax you owe.
• Cash flow projections, if possible so you can better estimate what you can afford to pay.

You do not need a perfect forecast, but you do need to demonstrate that you have thought realistically about what you can afford.
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Asking for a Time to Pay arrangement

A Time to Pay arrangement is a formal instalment plan that allows you to clear the Corporation Tax bill over an agreed period. HMRC considers these on a case-by-case basis.

This is the most common solution when a company cannot pay in full.

How a Time to Pay arrangement works

During the phone call, HMRC will ask about things like why you can’t pay and what you could afford to pay (both now and monthly).

HMRC usually wants the debt cleared within 12 months, although longer plans may be agreed in unusual circumstances. They will only accept a plan that is affordable and realistic. It must be based on actual figures, not optimistic guesses.

If agreed, you commit to regular monthly payments. As long as you stick to the schedule, HMRC will not begin enforcement action.

Interest continues to apply until the debt is paid, but penalties may be avoided as long as you cooperate and remain up to date with future tax obligations.

What makes HMRC more likely to approve a Time to Pay request?

As a general rule, HMRC is more likely to be flexible with businesses that are honest and organised. Below is a quick guide showing factors that can help you get a Time to Pay arrangement approved, and factors that make it more likely HMRC will refuse.

Getting professional guidance for more complex situations

If reducing your bill or arranging a Time to Pay plan doesn’t fully address the situation, some companies choose to speak with a professional, such as an accountant or insolvency practitioner.

These experts can explain formal options, including Company Voluntary Arrangements, administration, or other restructuring approaches. These routes are designed to help companies navigate more complex financial circumstances and are usually explored with guidance from a specialist.

Corporation Tax debts form part of the company’s overall liabilities if it enters liquidation. Professional guidance can help directors understand the available options and potential outcomes, giving them clarity and support during a challenging time.

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What you shouldn’t do if you can’t pay

Nobody enjoys being in this situation, but there are a few things that almost always make the situation worse.

Don’t ignore the debt

Ignoring letters and reminders from HMRC will push the debt into an enforcement stage. Once enforcement action begins, you’ll find HMRC become far less flexible. 

Don’t wait until penalties are charged

Penalties and interest quickly increase the amount owed. Don’t ignore the problem and hope it goes away. It’s better to contact HMRC as soon as you realise you can’t pay and get a solution sorted.

Don’t make unrealistic promises

If you agree to payments you can’t actually afford, you are more likely to default. A defaulted Time to Pay arrangement damages credibility and reduces your chance of a new agreement. 

Don’t assume that HMRC will refuse to help

HMRC is often more understanding than people expect, especially when they’re contacted early, and businesses are honest. The key is to engage early and openly, and you’re more likely to find a resolution that both parties are happy with.
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Checklist: what to do right now

If you can’t pay your Corporation Tax bill, follow these steps as soon as possible:

1. Contact your accountant to see if there are any legal ways to reduce your Corporation Tax bill.
   
   
2. File your Company Tax Return, incorporating any reliefs, allowances, or losses.
   
   
3. Gather financial information, including cash flow forecasts.
   
   
4. Contact HMRC as soon as possible.
   
   
5. Explain the situation honestly and clearly.
   
   
6. Ask whether a Time to Pay arrangement is possible.
   
   
7. Suggest an affordable monthly amount based on real data.
   
   
8. Keep future Corporation Tax and VAT obligations up to date.
   
   
9. If the business is facing wider financial pressures, consider seeking professional advice.

Taking action early can help reduce stress, costs, and risk.

Moving forward with confidence

Facing a Corporation Tax bill you can’t pay is tough, but it doesn’t have to be chaotic or overwhelming. With the right information and a clear plan, you can take back control of the situation far more quickly than you might expect.

If you’d like support reviewing your bill, our team at Crunch can help. We can check whether anything has been missed, make sure your return is accurate, and help you prepare your figures before you speak to HMRC.

We work with Limited Company owners every day, so we know the process, the common stumbling blocks, and what HMRC is likely to accept. You don’t have to sort this out on your own. Reaching out early can make everything feel lighter, clearer, and far more manageable. We’re here when you need us.

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