Can't Pay Your Corporation Tax? How to Set Up an HMRC Payment Plan
Your CT600 is filed. The tax bill is calculated. But your company doesn't have the cash to pay it. What do you do?
Don't ignore it. HMRC charges interest on late payments and can escalate to enforcement action. But they also offer Time to Pay (TTP) arrangements for companies in genuine difficulty.
What Is Time to Pay?
Time to Pay is HMRC's arrangement for spreading a tax bill over monthly instalments. It's not automatic — you need to apply and HMRC needs to agree. But for companies with genuine cash flow problems, it's a well-established process.
Key facts
- Available for all HMRC debts including corporation tax
- Typical duration: 3-12 months (sometimes longer)
- Interest still accrues during the payment plan (currently ~7.25%)
- Late payment penalties may be suspended if you arrange TTP before the due date
- You must keep up with payments — miss one and the arrangement fails
When to Apply
Before the payment deadline (BEST option)
If you know you can't pay before the due date (9 months + 1 day after your accounting period), contact HMRC as early as possible. This:
- Shows good faith
- May prevent late payment penalties
- Gives you the strongest negotiating position
After the deadline (still possible)
You can still apply after the due date, but:
- Late payment penalties may already have been applied
- Interest has been accruing
- HMRC will be less flexible
When HMRC contacts you (worst position)
If HMRC has already sent payment demands or appointed debt collectors, you can still negotiate — but your options are more limited.
How to Apply for Time to Pay
Option 1: Online (self-serve)
For debts up to £150,000, you can set up a payment plan online at gov.uk. You'll need:
- Your company's UTR
- Your Government Gateway credentials
- Details of the debt you want to spread
- A proposed monthly payment amount
Option 2: Phone HMRC
Call the Payment Support Service: 0300 200 3835 (Monday-Friday, 8am-4pm)
Have ready:
- Your company name and UTR
- The amount you owe
- Why you can't pay in full
- Your proposed payment plan
- Details of your company's income and expenses
- Any assets the company owns
Option 3: Through your accountant
Your accountant can negotiate on your behalf. This is often more effective for larger debts or complex situations.
What HMRC Wants to Know
When you apply, HMRC will assess your company's ability to pay. They'll want to understand:
1. Why can't you pay?
Genuine reasons HMRC accepts:
- Cash flow timing — money is coming in but not yet received
- Unexpected expenses — equipment failure, legal costs, etc.
- Lost a major client — temporary revenue drop
- Seasonal business — income is cyclical
- Economic downturn — industry-wide issues
2. What can you afford monthly?
HMRC will expect the maximum you can reasonably afford. Offering too little will get rejected. They'll look at:
- Monthly income and expenses
- Cash reserves
- Other debts (and their priority)
- Expected future income
3. How long do you need?
Shorter is better from HMRC's perspective. A 6-month plan is easier to agree than a 24-month one.
4. What assets does the company have?
HMRC may ask about:
- Cash at bank
- Debtors (money owed to you)
- Property or equipment
- Investments
If the company has significant assets, HMRC may expect you to sell or borrow against them rather than spreading payments.
What a Typical Payment Plan Looks Like
Example: Company owes £15,000 corporation tax
| Month | Payment | Running Balance |
|---|---|---|
| Month 1 | £3,000 (larger first payment) | £12,000 |
| Month 2 | £2,000 | £10,000 |
| Month 3 | £2,000 | £8,000 |
| Month 4 | £2,000 | £6,000 |
| Month 5 | £2,000 | £4,000 |
| Month 6 | £2,000 | £2,000 |
| Month 7 | £2,000 + interest | £0 |
HMRC often expects a larger first payment to show good faith, followed by equal monthly instalments.
Interest
Interest accrues at the Bank of England base rate + 2.5% on the outstanding balance. At current rates, that's around 7.25%. On £15,000 over 7 months, that's approximately £450 in interest.
Tips for a Successful Application
1. Apply EARLY
The earlier you contact HMRC, the better your chances and the more flexibility you'll get.
2. Be honest about your finances
HMRC will find out if you've understated your ability to pay. Be transparent — they're more cooperative when you're straightforward.
3. Offer a realistic plan
Don't offer £100/month on a £20,000 debt. HMRC won't accept it. Calculate the maximum your company can genuinely afford.
4. File your CT600 first
Your CT600 must be filed before HMRC will discuss a payment plan. You can't negotiate payments on a debt that hasn't been formally declared.
5. Keep all other taxes up to date
If you're behind on PAYE, VAT, or other obligations, sort those out too. HMRC is less likely to grant TTP if you're falling behind on everything.
6. Make the first payment immediately
Offering to pay something now — even a partial payment — demonstrates good faith and makes HMRC more willing to agree a plan.
What If HMRC Says No?
HMRC can refuse a TTP arrangement if:
- They don't believe you can maintain the payments
- The company has significant assets it could use to pay
- You've had (and failed) TTP arrangements before
- The debt is very old
If refused, your options are:
- Negotiate a different plan — offer higher monthly payments or a shorter term
- Borrow commercially — a business loan at a lower rate than HMRC's interest
- Sell assets — use equipment or debtor financing
- Director's loan — you personally lend money to the company
- Insolvency advice — if the company genuinely can't pay, seek advice from an insolvency practitioner
Consequences of Not Paying
If you don't pay and don't arrange TTP:
Interest
7.25% per year on the outstanding amount, compounding daily.
Penalties
- Interest surcharges after 30 days
- Possible additional penalties for persistent non-payment
Enforcement
HMRC can:
- Send debt collectors (appointed bailiffs)
- Issue a county court judgment (CCJ) — damaging your company's credit rating
- Issue a distraint warrant — seizing company assets
- Present a winding-up petition — forcing the company into liquidation
- Pursue directors personally in some circumstances (personal liability notices)
Winding-up petitions
HMRC is one of the most active users of winding-up petitions. For debts over £750, they can petition to wind up your company. This is not a bluff — HMRC issues thousands of petitions annually.
Director's Personal Liability
In most cases, corporation tax is the company's debt, not the director's personal liability. However, directors can be personally liable if:
- They've given a personal guarantee
- HMRC issues a personal liability notice (where the company's failure to pay was due to the director's fraud or deliberate actions)
- The company trades while insolvent (wrongful trading)
Paying Your Corporation Tax on Time
Prevention is better than cure:
1. Budget for tax quarterly
Set aside 25% of profits each quarter into a separate savings account. When the tax bill arrives, the cash is ready.
2. Use HMRC's estimate
Your CT600 tells you how much tax is due. Don't wait for HMRC to confirm — pay based on your filed return.
3. Pay early if you can
There's no penalty for paying early. If cash is available, pay immediately after filing.
4. Monitor your cash flow
If you see a shortfall coming, act early. Contact HMRC before the deadline rather than after.
Frequently Asked Questions
Can I set up a payment plan online?
Yes, for debts up to £150,000. Go to gov.uk and search "pay corporation tax" to find the self-serve option.
Will a payment plan affect my company's credit rating?
Not directly — HMRC doesn't report TTP arrangements to credit agencies. However, if it progresses to a CCJ, that will show.
Can I still claim expenses and allowances while on a payment plan?
Yes. A payment plan doesn't affect your tax computations — it only affects when you pay.
What if my situation improves and I can pay early?
You can pay off the balance early at any time. This saves interest and shows HMRC good faith for any future interactions.
Does filing with Taxpipe help avoid payment issues?
Filing early with Taxpipe gives you maximum time to plan your payment. The sooner you know your tax bill, the sooner you can budget for it. Filing costs just £59.
If you're waiting on a refund from HMRC instead, see our guide on how long HMRC corporation tax refunds take.
Know your tax bill early — file your CT600 with Taxpipe for £59. The sooner you file, the more time you have to plan your payment.