What are the Corporation Tax quarterly payment thresholds for a group?

July 10, 2018|In KRW Q&A|By Keith Witchell

Many readers are probably blissfully unaware of the Corporation Tax quarterly payment regime, since this only applies to companies with annual profits in excess of £1.5 million.

Let’s kick off with the basics. Large companies with annual profits in excess of £1.5m per annum have to make quarterly Corporation Tax payments to HM Revenue & Customs. Their first payment is in month 7 of the accounting period, then month 10, followed by month 1 of the following accounting period, and finally month 4 of the following accounting period. They therefore not only have to start paying their Corporation Tax sooner, they end up settling it in full within 4 months of their year end, compared to 9 months after their year end for small companies.

The instalment payments are calculated based on an estimate of taxable profits, with the final payment adjusted based on the actual liability. If your instalment payments end up lower than they should have been, HM Revenue & Customs can apply interest to the shortfall.

From April 2019 very large companies with profits in excess of £20m will have to make their quarterly payments four months earlier, in months 3, 6, 9 and 12 of the accounting period.

So this is just for large companies then? Usually yes, but where you have a group of companies, where there is at least 51% common ownership of each company, then the limits are divided by the number of group companies.

Let’s consider an example where we have a trading company that is wholly owned by a holding company, and that holding company also wholly owns a separate property/investment company. In this case there are 3 51% group companies in total, and the £1.5m profits limit must be divided by 3, which means that if any of the group companies have profits in excess of £500,000 they will fall into the Corporation Tax quarterly payment regime.

There is an exemption where a company has a Corporation Tax liability of less than £10,000, but otherwise the quarterly payment regime would need to be applied. However, the group test is applied with reference to the number of 51% group companies at the end of the previous accounting period, which avoids the quarterly payment regime being applied retrospectively where you get to the end of the year and breach the thresholds for the first time. In such a case you would not need to start making quarterly payments until the subsequent accounting period.

Key Facts

  • Large companies with profits >£1.5m have to make quarterly Corporation Tax payments
  • Payments are made in months 7 and 10 of the year, and months 1 and 4 of the following year
  • The £1.5m limit is divided by the number of 51% group companies at the previous year end
  • As a result a small group of 3 companies would have to pay quarterly if profits >£500,000

For further advice on this matter please contact me.

Keith Witchell