How it Works
Corporation tax is a liability that every limited company in the UK must pay - and HMRC is particularly keen that it is paid on time.
Changes in the corporation tax calculation that came into force for the 2023/24 tax year mean that the amount of corporation tax that your company must pay depends on its profits, with smaller companies (those with under £50,000 of profit) charged 19%, and larger companies 25%.
Meeting your tax obligations is a must, making it one of the primary outgoings for any business each year.
Thankfully, if you are in the unfortunate position of facing a significant corporation tax bill that you cannot afford, a range of loans are designed to help.
Read on to better understand corporation tax loans and how Clifton Private Finance can help.
What is a Corporation Tax Loan?
A corporation tax loan is a business loan designed to help you spread the cost of paying your corporation tax bill over a longer period, usually between 6 - 12 months.
As paying your corporation tax bill to HMRC is expected in a single payment, it can be very high, and difficult for the business to manage without a significant disruption to cash flow.
Corporation tax loans are quick to secure, with a decision typically made within 24 hours and payment within 48 hours, meaning they are perfect to relieve the stress and pressure of debt to HMRC without any lengthy worry.
How Does a Corporation Tax Loan Work?
A corporation tax loan is a form of unsecured business loan that is provided to the business for the specific use of payment to HMRC.
The unsecured nature of the loan means that it is not tied to any business assets for security, and there is no worry that an asset is at risk of repossession should you struggle to make repayments.
However, as an unsecured business loan, your eligibility will depend on your business's financial health and credit status.
Lenders will be keen to examine your business credit rating to determine the financial risk associated with lending the business money. If this is strong, then you will be easily able to obtain the financial help you need.
If your business credit history is insufficient to secure the loan, a personal guarantee from one or more directors will be required to get the funding you need. Loan terms, such as the repayment interest rate, may also be adjusted as necessary to mitigate the lender’s risk.
With a wide choice of potential lenders, securing a corporation tax loan for any solvent UK limited company is usually possible.
Corporation Tax Loan Calculator
Use our business loan calculator below to get an idea of what your repayments could look like. Interest rates will vary on a case-by-case basis.
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What Alternatives Are There to a Corporation Tax Loan?
While a corporation tax loan offers an easy solution to a significant corporation tax bill, there are other options available to businesses to avoid problems and penalties from HMRC. Here are 5 alternatives:
HMRC Time to Pay arrangement - If your business is facing financial hardship, HMRC offers a “Time to Pay” arrangement where they may offer a payment plan similar to loan repayments. Be aware that such an arrangement is not available to all and will involve scrutiny of your company finances by HMRC. Should you wish to apply for a Time to Pay arrangement, this can be done by contacting HMRC directly.
Standard unsecured business loan - While a corporation tax loan is the most suitable for the repayment of a tax liability, it is possible to use a standard non-specific business loan for the purpose. This can be beneficial if additional funds are desired for other business use.
Secured business loan - A secured business loan is one where assets are used as collateral to mitigate the lender’s risk and may be a suitable alternative if the business credit history is particularly poor. Secured loans also tend to have more favourable interest and repayment terms, making them cost less to the business in the long term.
DSCR (Debt-Service Coverage Ratio) loan - A DSCR loan is similar to a standard unsecured business loan. However, the criteria used to determine loan suitability is based on current company finances rather than the historic credit report, making it a good alternative for businesses with poor credit scores or those who have not had time to build up a significant UK credit history.
Personal loan - It is possible for a director to take out a personal loan that is then used to pay corporation tax or for a director to loan the business the required sum from his or her personal finances.
Applying for a Corporation Tax Loan
At Clifton PF, we have a team of corporation tax loan specialists who are able to find the right business loan for you.
With our access to a wide range of lenders, each with slightly different specialisations and criteria for loan applications, we will be able to find the right loan to suit your business.
If you are concerned about an upcoming corporation tax bill or would like to discuss business loans for any purpose, contact Clifton Private Finance today.
