Corporation tax is payable to HMRC as a lump sum and can represent a significant cost for businesses, with liabilities sometimes running into the millions. For many companies, the payment deadline can create pressure on cash flow, particularly when it coincides with wider year-end budgeting and financial planning.
A substantial corporation tax bill may fall at a time when a business is managing seasonal fluctuations in revenue, preparing for the year ahead or looking to retain liquidity for growth opportunities. In these circumstances, paying a large tax liability in one lump sum can affect how capital is deployed across the business.
Corporation tax finance can provide an alternative. A lender can settle the company’s corporation tax liability with HMRC, allowing the business to retain its working capital and repay the finance in agreed instalments. This can help businesses manage cash flow, avoid late payment penalties and maintain liquidity for other priorities.
How Do Corporation Tax Loans Work?
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If you are considering a corporation tax loan, Enness will first assess your wider business requirements to determine whether this is the most suitable type of finance. Depending on how you intend to use your available capital, other corporate finance facilities may also be available and could offer greater flexibility in terms of how funds can be deployed, as well as different rates or repayment structures.
If a corporation tax loan is suitable, we can approach relevant lenders and negotiate personalised offers. In some cases, indicative terms may be available within 48 hours. As an independent broker, we can access a wide range of lenders offering this type of finance and work to secure competitive terms based on your business requirements.
Once the finance is completed, the lender will usually pay HMRC directly. Your business will then repay the lender in instalments over an agreed term, commonly around 12 months, although alternative repayment periods may be available depending on the lender and the circumstances of the transaction.
Advantages And What To Know About Corporation Tax Finance
Corporation tax loans can offer several potential benefits, including the ability to:
- Manage your company’s cash flow by settling a corporation tax liability through a lender and repaying the finance in instalments
- Retain capital within the business for growth opportunities, new hires, other liabilities or new contracts
- Avoid late payment penalties where the business may otherwise struggle to meet its corporation tax payment deadline
This type of finance can often be arranged quickly, subject to lender requirements and due diligence. Both secured and unsecured corporation tax loans may be available depending on the borrower’s financial profile and the size of the facility.
Who Are Corporation Tax Loans For?
Lenders can consider corporation tax loans for businesses in a range of circumstances. The strength of the case for borrowing and the affordability of the facility will be central to any lending decision. In general, businesses seeking corporation tax finance tend to fall into one of two categories:
- Businesses in a strong financial position that want to retain cash within the company rather than use available liquidity to settle a large corporation tax liability in one payment. The capital retained may be used to support specific projects, growth plans, working capital requirements or wider cash-flow management.
- Businesses facing a short-term capital shortfall that may make it difficult to pay their corporation tax liability by the deadline. This could result from a seasonal dip in revenue, unexpected liabilities, an unusually large tax bill following a particularly successful trading period or wider economic pressures. A temporary cash-flow challenge does not necessarily prevent a business from accessing finance, but lenders will typically need to see that the facility is affordable and that the company remains in a sound financial position overall.
Corporation tax loans can range from around £50,000 to multi-million-pound facilities and may be available to both small and medium-sized enterprises (SMEs). Niche and boutique institutions are among the active lenders in this area and often offer a wider suite of corporate finance products alongside corporation tax funding.
These lenders can be particularly useful for SMEs, as they may offer more tailored facilities based on the company’s specific circumstances. Larger businesses may also use corporation tax finance as part of wider cash-flow management and funding strategies, often alongside facilities provided by retail or private banks.
Speak To A Finance Specialist
Enness arranges corporate finance, including corporation tax loans. We can assess your funding requirements, explore suitable lending options and help structure a facility around your business’s wider cash-flow needs and repayment strategy.
Speak to a Finance Specialist to discuss your requirements and explore the corporation tax finance options available to your business.
The views and opinions expressed in this piece are those of the author and do not constitute advise or a recommendation, nor do they necessarily reflect the official policy or position of Enness. They are also not intended to indicate any market or industry viewpoints, or those of other industry professionals.
This guide is for information and illustrative purposes only and nothing contain within should be construed as advice or a recommendation.
This guide is for information and illustrative purposes only and nothing contain within should be construed as advice or a recommendation.
Corporate financing and lender introductions are unregulated.
Islay Robinson, founder of Enness, is a specialist in high-value and complex mortgage transactions. He has played a key role in structuring and delivering bespoke financing solutions across a wide range of UK and international cases.
