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Article:

Corporation tax – new quarterly instalment payments from 1 April 2019

07 March 2019

Back in 2017, the Government created the Statutory Instrument that amended the rules for quarterly instalment payments for ‘very large’ companies - these take effect for accounting periods beginning on or after 1 April 2019. This may have cash flow implications for companies in transition to the new rules (eg in the summer of 2019 for companies/groups with a 31 March year-end).

Definition of ‘very large’ company

The new rules define a company as ‘very large’ where it has taxable profits of £20m or more for a 12 month accounting period. However, as always, the position is more complex for group companies.

For groups, the £20m threshold is divided by the number of “related 51% group companies”: for these purposes, all active companies in the group are counted – including companies outside the UK. Equally, the threshold is reduced proportionately if the period is less than 12 months. However, there is a de-minimis limit of £10,000 tax liability (for all companies except those that pay the bank levy) – below this amount, a company will not be treated as ‘very large’.

New payment dates

The payment dates for qualifying ‘very large’ companies will be brought forward under the new rules and the new timetable will be:

  1. 14th day of 3rd month of the period
  2. 14th day of 6th month of the period
  3. 14th day of 9th month of the period
  4. 14th day of 12th month of the period.

For short periods of account, there are special rules to ensure that any ‘final’ instalment payment always falls within the accounting period.

Transitional years

Companies that now qualify as ‘very large’ will need to make an additional payment in the first quarter of adopting the new rules; this is best illustrated by an example.

A Ltd has a 31 March year-end and makes taxable profits of £35m for the year to 31 March 2019. Its corporation tax payment dates will be:

Date Period to 31 March 2019 Period to 31 March 2020
14 April 2019 3rd instalment  
14 June 2019   1st instalment
14 July 2019 4th instalment  
14 September 2019   2nd instalment
14 December 2019   3rd instalment
14 March 2020   4th instalment

 

‘Large’ companies - definition changed but payment dates unchanged

The definition of a ‘large company’ will now have an upper limit - companies will be large if the profits for two consecutive 12 month periods are more than £1.5m but do not exceed £20m. As now, the thresholds are apportioned between 51% group companies and time apportioned where the period is not 12 months. There is no change in the pattern of quarterly payments for such ‘large’ companies (payments will be due in the seventh and tenth month of the accounting period and the first and fourth month of the following period).

The balancing payment date for all corporation tax remains nine months and one day after the end of the accounting period (the only payment date for ‘small’ companies). For help and advice on any corporation tax compliance issue, please contact Lee Jefferson.

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