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What happens If My Business Cannot Pay Its Corporation Tax?

If your business can’t pay its corporation tax then HM Revenue and Customs will send in a bailiff to your business premises to cease 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.

Corporation Tax and HMRC in more detail

H M Revenue and Customs is one of the few creditors who will always eventually wind up your company and push it into Liquidation. It costs at least £2,000 or more to force a Liquidation, so often creditors who want to be paid will see it as a very last resort.

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 H M Revenue and Customs.

If you owe the corporation tax and cannot pay the usual process is:

  • 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 may write or telephone you.
  • Within 14 days of the hearing 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 don’t 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.


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