If your company cannot pay a Corporation Tax or VAT bill in full on time, contact HMRC as soon as possible. You may be able to agree a Time to Pay arrangement. External finance is another route to compare, but it adds its own costs and repayments. Neither option is automatic, and borrowing should not replace tax or insolvency advice where you need it.
What to do first
- Confirm the amount and deadline with your accountant or HMRC.
- Update your short-term cash forecast using realistic receipt dates.
- Contact HMRC promptly if you cannot pay in full by the deadline.
- Work out what the company can genuinely afford each month.
- Only compare external finance once you know the size and cause of the shortfall.
Do not ignore the liability while looking for finance. HMRC's current guidance explains how to ask for help and whether you may be able to set up a payment plan.
Time to Pay or external finance?
| Question | HMRC Time to Pay | External business finance |
|---|---|---|
| Who decides? | HMRC considers your request and financial circumstances | A provider assesses the company against its criteria and terms |
| What happens to the tax? | The agreed tax debt is paid to HMRC in instalments | The finance may pay HMRC, leaving a separate debt to the provider |
| What does it cost? | Interest may continue on the outstanding balance | Interest, fees and other charges depend on the finance agreement |
| What must you test? | Whether the proposed HMRC payments are affordable and sustainable | Total repayable, payment timing, security and a weaker-month scenario |
| Is it guaranteed? | No. HMRC must agree the arrangement | No. Any offer depends on assessment, approval and terms |
There is no universal cheaper option. Compare the actual payment schedule, total cost and consequences of missing payments. If HMRC agrees Time to Pay, follow the arrangement and contact HMRC if your circumstances change.
Interest and penalties can continue
HMRC can charge late-payment interest on overdue VAT from the first day it is overdue, and penalties may apply depending on how late the payment is. An agreed Time to Pay proposal can affect late-payment penalties, but interest can still run on the outstanding balance. Check the current HMRC guidance for your position rather than relying on an old rate or a general example.
Is this a one-off gap or a recurring problem?
A one-off gap might follow an unusually late customer payment, an exceptional cost or a short period of fast growth. A company that repeatedly cannot reserve enough for tax has a different problem. Adding another repayment could make that cycle worse.
- What caused the shortfall, and has it happened before?
- Are future tax amounts being set aside as income arrives?
- Which evidenced receipt will fund the proposed repayments?
- Could the company still pay after a weaker trading month?
- Would the new finance mainly move the same shortage to a later date?
If the company may be unable to pay debts as they fall due, do not assume borrowing is the answer. Get appropriate professional advice promptly.
Finance routes you could investigate
Depending on your circumstances, you could investigate a term or working-capital loan, an overdraft or revolving facility, finance linked to eligible invoices, or refinancing suitable business assets. Each route works differently. Availability, cost, security and repayment terms depend on the provider and your company.
See the working-capital comparison for the route-level detail. If this tax liability is part of a wider short-term mismatch, work through the cash-flow gap guide too.
What to prepare for a finance conversation
Be ready with the liability amount and deadline, the current position with HMRC, business bank statements, accounts or management figures, a cash-flow forecast and details of existing borrowing. You should also explain what caused the gap and where the repayments will come from. Requirements vary, and providing information does not mean finance will be approved.
Frequently asked questions
Can a business borrow to pay Corporation Tax or VAT?
Potentially, subject to a provider's assessment and terms. Contact HMRC promptly as well, because a Time to Pay arrangement may be another route. Compare the real payment schedule and total cost rather than assuming borrowing is best.
Is HMRC Time to Pay guaranteed?
No. You can ask HMRC for a payment arrangement, but HMRC considers the request and your financial circumstances. Use the current GOV.UK route and provide accurate information.
Does UK Loan Experts give tax advice?
No. This page gives general information about finance choices. Confirm the tax amount, deadline and accounting treatment with HMRC or a suitably qualified adviser.