What happens if you don't pay corporation tax in the UK?

If you own a business in the UK, you must make the payments on time. However, under some scenarios, you may file to make the payment. You must know that HMRC follows very strict tax regulations as a business owner.

The regulatory body of HMRC keeps a check on your corporation tax less than that of VAT. It is crucial to keep the communications clear and ensure you're paying it on time. However, you must also communicate it when you're unable to pay the taxes on time.


What is corporation tax?

The companies need to pay corporation tax, a tax that pays on their profits. Therefore, the corporation tax businesses pay to the bodies depends on how much profit they have made. The accounting department and director of the company must make it a point to prepare all the financial documents.

They must ensure the documents are accurately marked with appropriate amounts. The corporation tax must be paid within nine months of the financial year. The companies will need to file CT600 to the Companies House. If they can't pay it in time, the regulatory bodies will have to deal with the consequences.

Who pays corporation tax?

Limited companies are liable for paying the corporation tax. Once your business starts making a profit, you must start paying the corporate taxes. However, as per the rules, the losses can be carried forward from the previous financial year. If your company isn't making a loss, you will be liable for paying corporation tax.

Sole traders are, however, not liable for paying the corporation tax. Nonetheless, they may need to pay the income tax upon their profits.

How much corporation tax is to be paid?

Businesses must clearly understand how much corporation tax is to be paid. Usually, the amount of corporation tax businesses must pay depends on their annual profit. It may include the company's profit via investments, rental incomes, or selling any asset.

Currently, the corporation tax rate is 19%. However, the Companies House may change the rules to suit the purpose. It is advisable to keep checking the official website of Companies House to know about the current rules regarding tax payment.

Accounting deadlines

The HMRC and other regulatory bodies in the UK are very serious about the deadline. The corporation tax you need to pay significantly depends on the accounting year-end. Businesses must identify what their year-end is. Therefore, the accountants can prepare the documents for tax filing before the deadline.

If there is a need to extend corporation tax liability, the same must be communicated to the bodies. If you file the taxes before, you may need to pay fewer charges. However, the amount will keep adding up if you're waiting till the last minute for payment. This may pose a problem as you may fail to meet the corporation tax liability.

If you cannot make the payment, HMRC may as well enforce the payment issues.

Corporation tax needs to be paid annually. If companies' profit is less than £1.5 million, they can consider a one-time payment. However, companies whose profit is more than that have the flexibility to pay the taxes in four installations. Nonetheless, payment or corporation taxes for limited companies can be difficult. Therefore, the contractor must ensure they make the payment on time. The HMRC can petition for the closure of the company.

What is the penalty for the late payment of corporation tax?

If you are filing for the company corporation tax, ensure you fill-up the documents properly. The HMRC will issue a penalty if there is any problem with the same. The late penalty you pay completely depends on the number of days you have missed. The HMRC is liable for raising a tax determination complaint if your payment is later than 6 months. However, it is advisable to anticipate the tax inclusive of penalties.

You should check the timeline or deadline of the tax. After twelve months, you will need to pay 10% of the unpaid tax. If you do not pay the sufficient amount or within time, HMRC will be charging a certain amount of company interest. The interest will be charged depending on the days within which the amount should be paid. Usually, the interest rate on late payments is around 2.75%. Nonetheless, this can vary depending on your business' profit.

What happens if I fail to pay corporation tax?

If you cannot pay the corporation tax in time, HMRC will send the matter to the Enforcement Team. The Enforcement team can further take the matter ahead to check how much money will be collected. Depending on that, they may ask you to send the payment within time.

However, it is advisable to reach out to the professionals in the early stages itself. If any company fails to pay the Corporation Taxes in time, they can opt for various options such as:

  • Time to pay arrangement

    If you need some extra time to pay taxes, you can reach out to HMRC. Sometimes the businesses may need some more time. It is advisable to check if HMRC allows you to make the payment in instalments or not. The conditions for Time to Pay arrangement or TTP will vary significantly depending on the company.

  • Stopping a winding up petition

    As a company, you can prevent the WUP from winding up the order by disputing the amount to HMRC. You can pay when you're able to afford it. Check the company admission procedure.

    You should check all the details if you fail to make the payments on time. Make sure to contact the respective authorities or bodies to understand the procedure.

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