How to pay Corporation Tax (and claim a refund)

How to pay your Corporation Tax

HMRC offers several ways to pay your Corporation Tax, and the method you choose can affect how quickly your payment reaches them. It's crucial to allow enough time for the payment to clear by the deadline.

Here are the main payment methods:

• Online or telephone banking (Faster Payments, CHAPS, Bacs): This is often the quickest way. Faster Payments usually clear on the same day or the next day. CHAPS (Clearing House Automated Payment System) payments clear on the same day if made by the bank's cut-off time. Bacs payments take three working days to clear.
• Debit or credit card online: You can pay using a debit or corporate credit card through HMRC's online service. This typically clears on the same day or the next day.
• At your bank or building society: You can pay by cash or cheque at a bank or building society using a payslip from HMRC. This method takes three working days to clear.
• By post (cheque): You can send a cheque by post to HMRC. This takes three working days to clear once HMRC receives it, so factor in postal delivery times.

Always check the specific payment details and bank account numbers on the official gov.uk website before making any payment.

Using the correct payment reference

When you make a Corporation Tax payment, you must use your 17-character Corporation Tax payment reference. This reference is made up of your 10-digit Unique Taxpayer Reference (UTR) followed by a letter 'A' and then six numbers.

You can find this reference on:

• Your payslip from HMRC.
• Any reminders from HMRC.
• Your 'notice to deliver a Company Tax Return'.

Using the correct reference ensures your payment is allocated to your company's Corporation Tax account promptly. If you use the wrong reference, your payment might be delayed or misallocated, potentially leading to late payment penalties.

When Corporation Tax is due

Your Corporation Tax payment deadline is usually nine months and one day after the end of your company's accounting period. For example, if your accounting period ends on 31 December 2026, your Corporation Tax payment would be due by 1 October 2027.

However, if your company's taxable profits are £1.5 million or more, you must pay your Corporation Tax in instalments. These instalment payments are due earlier than the standard deadline.

Instalment payments for large companies

Companies with annual taxable profits of £1.5 million or more (or £20 million or more for 'very large' companies) must pay their Corporation Tax in quarterly instalments. The specific deadlines for these instalments depend on your accounting period.

For example, for a 12-month accounting period, the instalments are generally due:

1. Six months and 13 days into the accounting period.
2. Three months and 13 days into the accounting period.
3. Three months and 13 days after the end of the accounting period.
4. Six months and 13 days after the end of the accounting period.

If your company is part of a group, the £1.5 million threshold is divided by the number of active companies in the group. Your accountant can help you determine if your company needs to pay by instalments and calculate the exact due dates.

Claiming a Corporation Tax refund

You might be due a Corporation Tax refund if your company has overpaid its tax, for example, due to an error, a change in your tax calculation, or if you've carried back losses.

Here's how to claim a refund:

1. Amend your Company Tax Return: If you've overpaid because of an error in your original tax return, you should submit an amended Company Tax Return (CT600) to HMRC. You can usually do this online through HMRC's Corporation Tax online service.
2. Submit a claim for repayment: If you're claiming a refund for reasons other than amending a return (e.g., carrying back losses from a later period), you might need to submit a specific claim for repayment. Your accountant can advise on the correct form or method.
3. Provide bank details: Ensure HMRC has your company's correct bank account details. Refunds are typically paid directly into your bank account.
4. Wait for processing: HMRC will process your claim and, if approved, issue the refund. This can take some time, so it's important to submit accurate information to avoid delays.

HMRC will usually pay interest on overpaid Corporation Tax from the later of the due date for the tax or the date the tax was paid, up to the date the refund is issued.

Common mistakes

• Using the wrong payment reference: This is a very common error that can lead to payments being misallocated and HMRC chasing you for "unpaid" tax. Always double-check your 17-character reference.
• Missing deadlines: Forgetting the nine-month-and-one-day deadline can result in interest and penalties from HMRC.
• Not allowing enough time for payment to clear: While Faster Payments are quick, other methods like Bacs or cheques by post take longer. Always factor in clearing times.
• Ignoring instalment payment rules: If your company is large enough to pay by instalments, failing to do so can lead to penalties and interest.
• Not keeping accurate records: Poor record-keeping can lead to errors in your tax return, resulting in overpayments or underpayments and making refund claims more difficult.