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What Happens if my Business cannot pay it's Corporation Tax?

The Quick Answer

You need to be proactive and contact HM Revenue & Customs and ask for time for pay if you want to keep trading.

If you business can not afford to pay its Corporation Tax then  HM Revenue and Customs will end in a bailiff to your business premises to seize company assets in order to be sold at auction to pay your corporation tax bill. If the debt is high enough and over at least £750 they may serve a statutory demand which is the first step in winding your company up. This is called Compulsory Liquidation.

The answer in more detail

HM Revenue and Customs is one of the few creditors who will always eventually wind up your company and push it into Liquidation. If you want to close the company down we can help you do this quickly by using liquidation. It stops the tax debts and stops HM Revenue and Customs from chasing you.

It is a company debt and they can not pursue the directors or shareholders for company tax.

If you want to carry on the business be proactive and contact HM Revenue and Customs and ask for a time to pay agreement. We can do this for you if you are worried about it. Every business should get at least once chance to do this.

If the debt is disputed or has been paid you should contact HM Revenue and Customs right away to try and sort it out with them directly. Be careful however of cold calls from unqualified advisers who say they can help and have a good relationship with H M revenue and Customs – they may not be telling the truth and may only be trying to take a fee from you. They may also make the situation worse.

Never pay your corporation tax to anyone but HM Revenue and Customs.

If you owe the corporation tax and do nothing then this is what will happen:

  • HM Revenue and Customs will write to you asking you to pay.
  • They may send in a bailiff to take assets although they may not if the tax debt is large.
  • If you ignore this they may issue a statutory demand – which gives you 21 days to pay or 18 days to object.
  • They will then file a proposed winding up petition in Court and the Court will write to you.
  • The Court will tell you the winding up petition hearing date. They have to give you at least 14 days notice.
  • The winding up petition will be advertised before it is heard in the London Gazette. Creditors including banks will see it. So do unlicensed debt firms who will write or telephone you. Be careful of them.
  • Within 14 days before the Court date your bank account will be frozen as all dispositions are void – this means all transactions are cancelled.
  • You can attend the hearing and ask for an adjournment or state why you do not think the tax is due. Leaving it that late is very risky.
  • At the hearing your company can be wound up and forced into liquidation.
Author: David Kirk
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We have just worked with Kirks to complete the closure of our company. Everything went smoothly and professionally. I would recommend this firm and the staff who were very very helpful and quickly finalised everything. Thank you Kirks.
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