Corporation tax is payable to HMRC as a lump sum and is usually due at the latest, nine months and one day after the end of the applicable accounting period, and the bill can run into the millions.
In many cases, the need to pay a relatively significant corporation tax bill to HMRC just before the end of the calendar year also coincides with the closing of budget season. This means many businesses are considering how to arrange their finances and how best to deploy capital to meet objectives and optimise cash flow. Having such a significant liability to pay during December or any time during Q4 (usually when a corporation tax bill deadline falls) can sometimes be challenging. Typically, it can coincide with a seasonal or pre-year-end slowdown in sales, which can impact a business's revenue and make the corporation tax bill challenging to pay by the deadline. Alternatively, the bill is payable at a time when a business is considering how to optimise cash flow take advantage of market opportunities, and financial positioning for the following year.
Corporation tax finance can be an ideal solution. A lender will settle your company's corporation tax liability before the deadline, leaving you with your company's natural capital reserves and able to avoid late payments or penalties, or able to optimise your cash flow position.
How Do Corporate Tax Loans Work?
If you are considering a corporate tax loan, get in touch. We will assess your business requirements to ensure a corporate tax loan is the best lending product for you in line with your needs. In some cases, depending on what you want to use capital for, different types of finance could be available to you and could be more advantageous to you in terms of how you can deploy the loan capital, rates or terms.
If a corporate tax loan is the best option for you, we will approach lenders and negotiate with them to provide you with personalised offers - we can often present these within 48 hours. As an independent broker, we can access all the lenders that offer this type of finance to source and negotiate the best deal for you. Upon completion - which can take as little as a few days - the lender will usually pay HMRC directly, and you will repay your lender in instalments. You'll repay the loan over a fixed period - usually twelve months, but other terms can be negotiated per your requirements.
Advantages And What To Know About Corporate Tax Finance
Corporation tax loans offer a number of benefits, which include the ability to:
- Optimise your company's cash-flow position by settling your corporate tax liability via a lender (who will usually pay HMRC directly) and then repaying it in instalments
- Retain capital within your business, using liquidity focusing on growth opportunities, hiring new employees, settling other debts or taking on new contracts
- Avoid fines for late payment to HMRC if you can't make your corporation tax payment by the deadline
This type of finance can be arranged quickly, and we can source and negotiate offers in just a couple of days. Both secured and unsecured tax loans are available.
Who Are Corporate Tax Loans For?
Lenders can consider offering corporate tax loans to businesses for various reasons. If there is a solid case for borrowing, and you can show that the loan is affordable, lenders can usually consider writing a loan. It's worth noting, however, that companies seeking corporation tax finance will generally fall into one of two categories:
- Businesses in an excellent financial position want to retain cash within the company that would otherwise have been used to pay the corporation tax liability to HMRC. The logic here may be to fund specific projects or growth, optimise the company's cash flow or ensure the company retains more day-to-day liquidity.
- Companies may struggle to accrue the necessary funds to pay their corporation tax in time for their deadline. This might be due to a seasonal dip in revenue, because they've paid off other unexpected liabilities that have been a priority for the business, an unexpectedly large corporation tax bill due to a very successful previous tax year, being affected by economic headwinds over the year, and so on. It's important to note that lenders can consider offering loans in this scenario - a short-term capital shortfall doesn't mean you can't access finance. However, to get a loan, your business must be able to demonstrate that the loan is affordable, you'll need to demonstrate a strong track record in business (with supporting documentation and an accounting history to match), and give the lender comfort that your company is in good financial stead overall, rather than in a critical financial position.
Lenders write corporation tax loans of varying amounts, from £50,000 up to multi-million pounds, and they lend to both small and medium businesses (SMEs). Niche and boutique institutions are some of the most active lenders in the space - they generally offer a suite of corporate finance products, which includes corporation tax loans - and many focus exclusively on lending to SMEs.
This makes them ideal lenders if you own or work for an SME. They tend to offer tailored finance deals, including structuring, rates, and terms optimised for SMEs, rather than larger corporations, which usually have different needs. Large companies are also active borrowers and use this type of finance regularly (usually to optimise cash flow), although they tend to work with retail banks for this kind of loan, given the amounts involved.
Get In Touch
Enness arranges corporate finance, including corporation tax loans. The team will be able to broker this type of finance for you exceptionally quickly, and you will usually be able to draw down loans in just a few days. Contact us to have a no-obligation chat about your needs.
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.
