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January 18th 2021

Corporation tax: instalment payment regime for larger companies

Most small companies are required to pay the corporation tax bill no later than nine months and one day after the company's accounting period end date.

However, if a private limited company's profits are at an annual rate exceeding £1.5m, the company must pay corporation tax in quarterly instalments starting within the year, unless:

  • the company's annualised net tax liability is less than £10,000; or
  • the company's annualised profits for the current year do not exceed £10m and either of the following applies:
    • this is the company's first accounting period; or
    • for the previous accounting period, either the company's annualised rate of profits did not exceed £1.5m or its annualised tax liability did not exceed £10,000.

Where quarterly instalments are necessary in respect of a financial year, they fall due on:

  • 1st instalment - six months and thirteen days after the first day of the financial year;
  • 2nd instalment - three months after the date of the first instalment;
  • 3rd instalment - three months after the date of the second instalment;
  • 4th instalment - three months and fourteen days after the last day of the financial year

Since instalment payments commence within the year (before the actual profits and tax liability can be determined), the corporation tax liability will need to be estimated in advance of the first quarterly instalment. The estimate of the corporation tax liability must then be updated as the company progresses through the financial year, with top-up payments made in respect of the earlier quarters, where appropriate. The final quarterly payment will be the company's actual corporation tax liability for the period, less the total of any payments already made.

The normal thresholds are reduced where the company in question is part of a group or has associated companies.

For further details, get in touch today.

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