The content on this page has been written by Keith Steven and approved by Chris Ferguson Licensed Insolvency Practitioner and Director of RMT Recovery and Insolvency. Updated April 2026
Many directors of smaller companies worry about paying Corporation Tax as it is often due a long time after the profits were actually made by the company. As such, they may have already spent the money saved up.
Your company’s tax accounting period determines the date for when corporation tax is payable; your business accountant will file this information. Nine months and one day after the day your tax accounting period closes you will need to pay the Corporation Tax.
Businesses with profits of less than £1.5m pay this tax once a year in one installment; those with profits above £1.5m can split it into 4 installments.
If you haven’t contacted HMRC prior to your tax payment date and then pay late, you will be issued a penalty. The penalties work as follows:
| Lateness | Standard Penalty | 3+ Successive Failures |
|---|---|---|
| 1 Day Late | £200 | £1,000 |
| 3 Months Late | £400 | £2,000 |
| 6 Months Late | £400 + 10% of unpaid tax | £2,000 + 10% of unpaid tax |
| 12 Months Late | £400 + 20% of unpaid tax | £2,000 + 20% of unpaid tax |
*Table data accurate as of April 1, 2026. Interest is additionally charged at 7.75% (4% above BoE base rate).
Immediate Steps to Take
If you are worried you can’t pay Corporation Tax on time then you should contact HMRC. HMRC will always be willing to listen to businesses that are struggling and the first thing to do is to talk to them and put your case in writing.
More usually, companies that are in financial distress run up other taxes such as VAT arrears and PAYE arrears and may not have actually made a profit, so corporation tax arrears are less common. It all depends on the profile of your business and the circumstances. It is usually a good idea to file and pay any corporation tax as soon as you know how much you owe in case the money is not there later on.
If this is the first time you’re contacting HMRC about this issue, you can contact their Business Payment Support Service.
Do not ignore demands and notices as penalties will start to mount up. They may well agree to a “time to pay” deal whereby you pay the tax in instalments so that you pay off the arrears over 6-12 months. However, do not promise to pay more than you can afford otherwise it will fall over and HMRC may move to wind up the company. Please call us for no obligation advice as we have years of experience of dealing with HMRC.
You can call us on 08009700539 or email help@ksagroup.co.uk
If the company cannot pay then it is likely to be insolvent. If this is the case then HMRC may well issue a winding up petition. It is important to act quickly so as to avoid being put into compulsory liquidation.
Insolvency may not be the end of the company. Contact us at RMT and we can advise what options are available.
This is simply where the company comes to an agreement to spread the payments over an extended time. Often directors can get 6-12 months by simply negotiating with HMRC direct. However as insolvency practitioners we can get 2 years, or even more, for the company to pay. This will need professionally put together forecasts and a full statement of affairs to be presented to the creditors.
A CVA or Company Voluntary Arrangement is a powerful and legally binding agreement with an insolvent company’s creditors which allows a proportion of its unsecured debts to be paid back over time. This is between 3-5 years. To be approved, 75%, of the creditors, by value, who voted need to support the proposal. This is a bit more work than a time to pay arrangement and is a formal process overseen by an insolvency practitioner, although directors remain in contol. However, it can give a company a very good chance to survive. It should be noted that HMRC is not is not a secondary preferential creditor for Corporation Taxes, unlike VAT and PAYE, which means that it can be compromised in a CVA along with other unsecured creditors.
Administration or liquidation are a more terminal solution in that the company is likely to stop trading and the assets sold to pay back the creditors. If the company has no future, even with some debt relief, then liquidation is the best option. This protects the directors from accusations of wrongful trading by stopping the losses of creditors getting worse. Any Corporation tax will be written off.
Will I lose tax losses if I go into a CVA? It’s very complicated from an accounting point of view.
Where a company entering into a CVA has accumulated trading losses for tax purposes, the continued availability of such losses in future periods is likely to be a crucial aspect to the successful implementation of the arrangement.
Assuming the company continues to trade throughout the CVA process, its unrelieved trading losses may be carried forward for offset against future profits arising from the same trade. See the page on CVAs and tax losses.
Written ByKeith Steven
Turnaround Director
Keith is the Turnaround Director of RMT Accountants & Business Advisors. Prior to being acquired by RMT his company KSA Group has undertaken more than 300 CVA led rescues. Read our case studies to see how.
