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How to raise finance to pay business taxes

02/01/2020

With HMRC taking a tougher stance on companies owing large amounts of tax, we look at how you can raise finance to pay business taxes such as VAT, Corporation Tax and PAYE.

According to figures compiled by accounting and advisory network Moore, over 4,000 winding up petitions were filed by HMRC in the 12 months to the end of September 2019, marking a four-year high.

A winding up petition is a legal notice put forward to the court by a creditor. 

A creditor can petition the court if they are owed more than £750 and it has not been paid for more than 21 days.

The application, in effect, asks the court to liquidate the company as they believe the company is insolvent. 

HMRC uses winding up petitions to pursue outstanding tax payments including VAT, Corporation Tax and PAYE from businesses.

These can result in closure of the business and liquidating any assets held.

From April this year, the number of winding up petitions may increase further still as HMRC will become a secondary preferential creditor in cases of insolvent liquidations. Currently, employees are the only preferential creditors.

With HMRC increasingly choosing to recover outstanding debts by winding up businesses as opposed to working with the business on ways to settle the amount, it is more important than ever to get ahead of your tax commitments and ensure that you have the necessary funds to pay your business taxes.

Tax commitments

The start of a new year can be an extremely challenging time for business cash flow.

Staff have often been paid early, order volumes often decline, customers are paying invoices late because everyone goes on holiday over Christmas and rent will be due.

So when the quarterly VAT bill is due and deadlines for PAYE and Corporation Tax also fall around the same time, it is easy for cash flow to become stretched.

Fortunately, there is a range of finance options available which can help you raise enough working capital to finance your tax commitments.

Here are three finance options which you might find useful:

1. Invoice finance

If your working capital is tied up in your sales ledger you could benefit from an invoice finance facility.

Invoice finance bridges the cash flow gap between paying suppliers and getting paid by allowing you to release up to 90% of an invoice’s value within 24 hours of its issue.

The remainder is then passed across once payment is received from the customer, less the invoice finance company’s fees.

If you need a more immediate but temporary cash flow boost, it is also possible to fund single invoices rather than the entire sales ledger. This is particularly useful if you have an invoice of particularly high value or those supplied on longer-than-usual credit terms. Get an instant quote below:

2. Business loans

If you do not have any fundable assets then a bank loan could be a suitable option as it allows you to quickly access working capital that can be used for any business purpose.

With so many loan providers and varying lending criteria, it can be hard to identify the right solution for your business yourself but working with a commercial finance broker can highlight the best fit for your needs and allow you to secure the finance needed to pay your business taxes.

Download the ultimate guide to business loans

3. Asset based lending

If you have lots of cash tied up in various assets, an asset based lending (ABL) solution could be the ideal facility to free up working capital to pay HMRC.

With invoice finance at its core, ABL also releases additional funding against the value of other assets, including plant and machinery, stock and property.

As the funding is secured against the value of your assets, ABL is typically more flexible than loans or overdrafts and can provide companies with cash flow support that grows in line with the business.

Read more about the benefits of asset based lending


As an independent commercial finance broker, we can help your business to identify and secure the funding needed to improve cash flow and pay HMRC on time.

Contact our team on 0800 9774833 or request a call back to discuss your requirements.

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Some of the funders we work with

  • 4Syte
  • Investec
  • InvoCap
  • Peak Cashflow
  • Secure Trust Bank
  • Boost Capital
  • MarketFinance
  • Sonovate
  • Ultimate Finance Group
  • Barclays
  • Leumi ABL
  • Calverton Finance
  • Close Brothers Invoice Finance
  • Giant
  • PNC Business Credit
  • Woodsford Tradebridge
  • Regency Factors
  • Santander Corporate & Commercial
  • inFund
  • Catalyst Finance
  • Asset Advantage
  • iwoca
  • Roma Finance
  • Nucleus Commercial Finance
  • Skipton Business Finance
  • Aldermore Invoice Finance
  • Pulse Cashflow Finance
  • Lloyds Bank Commercial Finance
  • Shawbrook Business Credit
  • ABN AMRO Commercial Finance
  • Davenham Trade Finance
  • Team Factors
  • Creative Capital
  • Partnership Invoice Finance
  • Metro Bank SME Finance
  • Positive Cashflow Finance
  • Berkeley Trade Finance Ltd
  • Royal Bank of Scotland
  • 1pm
  • Davenham Asset Finance
  • Trade Finance Partners
  • IGF Invoice Finance
  • Gener8 Finance
  • Merchant Money
  • Haydock Finance Ltd
  • Bibby Financial Services

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We are a credit broker and not a lender and offer credit facilities from a panel of lenders

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