Behind on Corporation Tax? Here’s What Directors Must Do Next (2025 Guide
Behind on Corporation Tax? Here’s What Directors Must Do Next (2025 Guide)
If your company is behind on Corporation Tax, receiving HMRC letters or struggling to pay a growing tax bill, this guide is for you.
Many directors search online for help when they can’t afford their Corporation Tax, and the rules can feel confusing, especially when HMRC starts adding penalties or threatening further action.
This article explains in simple terms what to do if your company owes Corporation Tax, the options available and how to deal with HMRC before things escalate.
1. If your company is behind on Corporation Tax, take this seriously.
When Corporation Tax is late, HMRC will eventually:
add interest
add penalties
issue warning letters
demand immediate payment
threaten enforcement action
block any attempt to close the company
Corporation Tax arrears are one of the most common debts UK companies face.
Falling behind doesn’t make you a bad director; but not taking action can make the situation much worse.
2. Can you close a company if it owes Corporation Tax?
This is one of the most common searches online:
“Can I close a company with Corporation Tax debt?”
The answer is:
❌ No, you cannot strike off a company that owes Corporation Tax
HMRC will always object to strike-off applications when:
Corporation Tax is overdue
VAT or PAYE is unpaid
CT600 returns are missing
letters have been ignored
✔ But you can legally close the company another way.
If the company cannot repay Corporation Tax, your legal closure method is a Creditors’ Voluntary Liquidation (CVL).
A CVL:
closes the company
writes off Corporation Tax and other debts
stops HMRC enforcement
protects directors from further action
This is the correct and legal process for companies that cannot afford to pay HMRC.
3. Your two main options if you can’t pay Corporation Tax:
Option 1: HMRC Time to Pay Arrangement (TTP)
A Time to Pay arrangement lets your company repay Corporation Tax in monthly instalments.
Suitable for companies that are:
still trading
temporarily struggling
able to afford smaller payments
HMRC usually agrees to a TTP if:
you contact them early
all CT600 returns are up to date
you provide a realistic repayment plan
Option 2: Close the company through a CVL
If the company cannot afford Corporation Tax now or in the future, a Creditors’ Voluntary Liquidation is often the safest and most realistic option.
A CVL:
stops all HMRC pressure
freezes interest and penalties
writes off all unsecured business debts
ensures legal closure
Directors are not personally liable for Corporation Tax unless there’s fraud or serious wrongdoing.
4. How to decide between TTP or CVL.
Ask yourself:
Is the business still viable?
If yes → HMRC Time to Pay
If no → CVL
Can you afford a monthly repayment plan?
If repayments would push the company back into debt → CVL
Is HMRC already threatening enforcement?
If yes → urgent advice is recommended.
A CVL may stop this immediately.
These questions help directors quickly understand their most realistic option.
5. What you MUST NOT do when behind on Corporation Tax:
To avoid serious consequences, do not:
❌ Ignore HMRC
❌ Continue trading while insolvent
❌ Apply for strike-off (HMRC will block it)
❌ Use company money for personal use
❌ Hope the debt “goes away”
If your company can’t afford Corporation Tax, the worst thing you can do is delay taking action.
6. What happens if you do nothing?
If ignored, HMRC can:
send enforcement officers
freeze company bank accounts
issue a winding-up petition
force the company into compulsory liquidation
Once HMRC starts this, directors lose control of the process.
Act before enforcement begins, not after.
7. In plain English: Your next steps if you owe Corporation Tax:
Step 1: Work out if the business can realistically recover
Is there a future? Can you trade out of debt?
Step 2: Choose the right option
✔ The company is still viable → HMRC Time to Pay
✔ The company cannot repay → Creditors’ Voluntary Liquidation
✔ Striking off the company yourself → Only possible when tax is fully paid
Step 3: Get advice early
Ignoring HMRC won’t make them go away; it just leaves you with fewer ways to fix things.
8. Summary
If you’re behind on Corporation Tax, here are your options:
Option A: Repay through HMRC Time to Pay
Suitable if the company is still viable.
Option B: Close the company via CVL
Suitable if the company is insolvent or cannot repay Corporation Tax.
Option C: Strike-off (DS01)
Only available when all Corporation Tax is fully paid and up to date.
Need help deciding the safest option?
At Company Closure Experts, we specialise in helping directors who:
are behind on Corporation Tax
are getting HMRC warnings
can’t afford a large Corporation Tax bill
need honest advice on closing or saving their company
want to avoid enforcement and penalties
We explain everything in plain English and help you take the right next step.