Corporation tax is payable on a limited company’s taxable profits. These include profit made on the business trading, any investments made and selling assets for more than they were purchased (also known as a “chargeable gain”).
Ideally all business should anticipate its level of corporation tax and provide as appropriate within the management accounts. In respect of private limited companies payment is due 9 months and I day after a company’s financial year ends.
However Companies House may extend your accounts deadline and therefore your corporation tax payment date if an event outside your control prevents you from submitting your accounts on time and you apply for more time to do so.
What happens if the company can’t pay?
If you are a business owner who knows that your company will be unable to pay its corporation tax bill on time, then it is recommended that your advisor contact HMRC as soon as possible.
Possible options available to you at this time are to be allowed more time to pay or to agree a payment schedule by instalments. Failure to do so can lead to penalties and interest being added resulting in a bigger debt.
You will be asked to provide information relating to income, expenditure, business assets and steps taken to get your tax position back in order. Only then will they be able to discuss options with you.
Ultimately HMRC will be concerned about how and when you are likely to be in a position to pay your corporation tax. If HMRC consider that the company will not be in a realistic position to bring its corporation tax up to date, they will not enter into any arrangement and in the event payment it is not made straight away, they will commence enforcement action.