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Are you struggling with your corporation tax payment? You’re not alone. Many UK businesses face challenges when it comes to managing their tax obligations, especially in times of financial uncertainty. This comprehensive guide will walk you through HMRC’s Time-to-Pay (TTP) arrangement, a lifeline for companies facing temporary difficulties with their corporation tax payments.
What is a Time-to-Pay Arrangement?
HMRC’s Time-to-Pay (TTP) arrangement is a vital option for businesses struggling with corporation tax payment. It allows eligible companies to pay their tax debt in installments, providing much-needed breathing room for cash flow management.
Key Point: TTP arrangements are not automatic. They must be negotiated with HMRC based on your company’s specific circumstances.
Eligibility Criteria for Corporation Tax Payment Plans
Whilst HMRC assesses each TTP application individually, companies are generally more likely to be eligible if:
- They owe less than £30,000 in corporation tax
- They can clear the tax debt within 12 months
- They have filed all required corporation tax returns
- The overdue payment deadline is within 60 days
- They have no other outstanding tax debts
- They are not currently on other instalment plans
Pro Tip: HMRC is often more sympathetic to companies facing unexpected issues like the insolvency of a major customer or sudden illness of key personnel.
Current Interest Rates and Penalties
As of the 2024/25 tax year, the interest rate for late corporation tax payment is 7.75%. However, this rate is subject to change as the interest rates increase alongside the Bank of England’s interest announcements. Be sure to check HMRC’s official website for the most up-to-date information.
Good News: Whilst interest will accrue from the original due date, companies on a TTP arrangement do not incur late payment penalties, provided they stick to the agreed payment schedule.
How to Apply for a TTP Arrangement
Step 1: Gather Required Information
Before contacting HMRC about your corporation tax payment, prepare the following:
- Company registration number
- Company address and telephone number
- Unique Tax Reference (UTR) number
- VAT registration number (if applicable)
- Details of tax payments you want to discuss
- Information on any expected HMRC repayments
- A clear explanation of your financial difficulties
- A proposal for repayment
Step 2: Contact HMRC
Companies may call the HMRC Business Payment Support Service to apply for corporation tax payment instalments. Seeking assistance from a tax professional may increase the likelihood of HMRC approving the request.
Step 3: Negotiate Your Payment Plan
Be prepared to discuss your company’s financial situation in detail. HMRC will want to understand why you are unable to make the corporation tax payment on time, what steps you have taken to raise funds, and your proposed repayment schedule
Negotiating with HMRC: Expert Tips
Some steps can build a strong case for a time-to-pay arrangement that aligns with your company’s financial capabilities and commitments. HMRC is more likely to approve honest and transparent applications with a realistic payment plan that shows a company’s commitment to clearing the tax debt as quickly as possible.
As much as possible, prepare financial projections to demonstrate how you will manage future corporation tax payments effectively. Others also consider offering security against the debt. In many cases, employing tax experts in the process guarantees a higher chance of approval.
Managing Your Corporation Tax Payment Plan
Once your time-to-pay arrangement is in place, sticking to the agreed payment schedule and filing tax returns on time will maintain the arrangement. Make sure to pay any new tax liabilities as they become due, and inform HMRC immediately if your circumstances change.
Strategy Advice: Set up a separate savings account for future corporation tax payments to avoid falling behind again.
What If You Miss a Payment?
Missing a payment under a TTP arrangement can have serious consequences. Usually, HMRC may simply cancel the arrangement and/or impose late payment penalties. In more serious cases, HMRC might proceed with enforcement steps, such as:
- Issuing a Distraint Order Notice to seize company assets
- Filing a Winding Up Petition, forcing the company into liquidation
Expert Advice: If you anticipate missing a corporation tax payment, contact HMRC immediately. In some cases, they may be willing to renegotiate the arrangement.
Seeking Professional Help
Whilst it is possible to negotiate a TTP arrangement directly with HMRC, many companies benefit from professional assistance with their corporation tax payment issues. Tax advisers and insolvency practitioners can:
- Help prepare your case for a TTP arrangement
- Negotiate with HMRC on your behalf
- Advise on other potential solutions if a TTP is not suitable
A lot of limited companies succeed in their TTP applications mainly due to professional representation.
Corporation Tax FAQs
Corporation tax is typically due 9 months and 1 day after the end of the accounting period, which is usually the company’s financial year, but may involve two periods in the first year of operation.
Corporations’ time-to-pay arrangements allow limited companies to pay corporation tax in instalments. If you pay income tax through self-assessment and anticipate that you may not be able to pay on time in the future, HMRC may also allow you to apply for time-to-pay as an individual taxpayer.
Late corporation tax payments incur escalating penalties: £100 if 1 day late, an additional £100 if 3 months late, 10% of the estimated tax bill at 6 months, and another 10% if 1 year late.
Failing to report capital gains in the UK can result in fines and interest charges. Proper financial advice can greatly help taxpayers reduce the amount of CGT they owe through various reliefs and conditions.
For the 2024/25 tax year, the CGT tax-free threshold is £3,000. Gains made within this amount are not liable to GGT.
Need Expert Help with Your Corporation Tax Payment?
Navigating tax regulations in the UK and negotiating a Time-to-Pay arrangement can be complex and time-consuming. Legend Financial comprises of a team of Chartered Tax Adviser (CTA) and Association of Chartered Certified Accountants (FCCA) that specialise in helping businesses like yours apply for corporation tax payments efficiently and effectively.
Take the Next Steps
Talk to our corporate tax accountants now, so we can start assessing your tax situation and recommend the next best steps. Our tax professionals at Legend Financial will assist you throughout the full cycle of corporation tax payment, from applying with HMRC, crafting feasible repayment proposals, to maintaining your instalment plan.
Book a free enquiry now. Click here to schedule your no-obligation call.
