Can I use a business loan to pay corporation tax?

Why companies borrow to pay corporation tax

Corporation tax is a large, predictable, lump-sum liability that falls due nine months and one day after your accounting year-end (larger companies pay in instalments). The bill is calculated on profit you have already earned — but that profit may be sitting in unpaid invoices, stock or equipment rather than in the bank when HMRC wants paying. Using short-term finance to meet the deadline lets you keep working capital in the business while spreading the cost of the bill over a few months.

It is a timing tool, not a way to avoid the tax. The right use is bridging a genuine cash-flow gap on a bill you can afford; the wrong use is borrowing to pay tax on profits that have effectively been spent, which signals a deeper problem worth addressing with your accountant first.

How it compares to an HMRC Time to Pay arrangement

HMRC may offer a Time to Pay arrangement that spreads the bill directly with them. That can be appropriate, but it is at HMRC's discretion, can carry interest, and a record of arrangements can affect how HMRC views the company. A business loan keeps the relationship with HMRC clean — the bill is paid on time — and gives you a fixed, predictable repayment plan. Which is better depends on the cost of each, how quickly you need certainty and your wider plans.

This is general information, not tax or accounting advice. Confirm the treatment for your company with your accountant.

How Credicorp finance fits

Credicorp lends to the UK limited company, not to you personally — so there is no personal guarantee. A short-term business loan or a revolving business credit facility can cover the tax bill and be repaid as your invoices clear. You can apply online as a company. The interest and any fees on business borrowing are generally an allowable business expense, though the corporation tax itself is not deductible — your accountant can confirm the treatment.