I can’t pay my Corporation Tax – what should I do?

Coronavirus, Corporation Tax, Limited Company,

The Coronavirus Pandemic has brought mayhem to the UK economy. Previously healthy businesses are closed, with no idea when they will be allowed to reopen. The Government has announced a range of support options to keep the economy afloat, but as yet there has been no specific announcement around Corporation Tax Payments.

Many companies may have amounts that will fall due before we return to normal.

When are Corporation Tax payments due?

Corporation Tax is calculated on the profits of a Company, and is payable nine months and one day after the Company’s year end. Penalties and interest apply on amounts that aren’t paid by the due date.

What should I do if Coronavirus means that I can’t make my Corporation Tax payment?

HMRC have set up a new telephone helpline to support businesses and self-employed people who may not be able to pay any tax that is due as a result of Coronavirus. This helpline is being manned with up to 2,000 people who can agree a payment arrangement with tax payers, which will enable them to spread the tax payments over a period of time.

If you would like to discuss making a payment arrangement with HMRC, you should call the dedicated helpline number (0800 024 12220) to do so. They are open Monday to Friday 8am to 4pm.

We would strongly advise that you take advantage of this opportunity. It will spread your Corporation Tax payment over a longer period, allowing you to preserve your cash balance.

You will need to bear in mind that this is only going to delay the liability, not remove it entirely, so be sure to include it in your cash flow planning for the future.

When NOT to make a time to pay arrangement.

The only exception to our recommendation to make an arrangement with HMRC would be if you are planing to apply for a Coronavirus Business Interruption Loan. In some cases, an HMRC payment arrangement may affect your chances of approval for finance.

You may need to plan carefully to make sure you have as long as possible to get a loan in place before any Corporation Tax is due, but please be careful on the timing.

What else should I consider before making a payment arrangement?

It’s important to look at your overall cash position before committing to a payment arrangement with HMRC. Once you have agreed an arrangement, you will have to adhere to it. If you re a client, you can put the payment arrangement into your copy of the complimentary 90 day Cash Flow modelling software we give you. This will enable  you to check that the proposed arrangement is affordable.

I have the cash to make my Corporation Tax Payment, but how do I do it?

Ordinarily, a Company should receive a payment slip from HMRC, which provides all of the correct references and bank account details to use. These enable HMRC to allocate your payment to the right Company, and to the right accounting period.

If you don’t receive a payslip, please use the following details. These may differ from those on the payslip, which should be used in preference, but will work as a fall back position and enable HMRC to trace your payment.

Sort code: 083210
Account number: 12001039

You’ll need to log in to your HMRC account, or speak to your accountant, to find out what reference to use. This will NOT be the same as you used to make your last Corporation Tax Payment, as they change each year.

 

As ever, if you’re unsure of the best course of action for your business, please get in touch. We’re very happy to chat through the various options and help you reach the best decision for you.

 

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