Currently, corporation tax for ‘large’ companies is payable under the quarterly instalment payments regime under Corporation Tax (Instalment Payments) Regulations, SI 1998/3175.
A company is considered to be ‘large’ where its taxable profits exceed £1.5million on an ongoing basis. Where the company is part of a corporate group, this profit limit is divided across the number of companies within the group.
Within the quarterly tax regime, instalments are due for a 12 month accounting period – 1st instalment: 6 months and 13 days after the commencement of the accounting period, 2nd instalment: 9 months and 13 days after the commencement of the accounting period, 3rd instalment: 12 months and 13 days after the commencement of the accounting period and finally the last instalment 15 months and 13 days after the commencement of the accounting period. So effectively 50% is paid within the accounting period that the tax arises and 50% in the following period.
For companies with annual taxable profits of £20million or more, new payment dates will apply for accounting periods starting on or after 1 April 2017 such that all of the corporation tax will be payable within the accounting period it arises. Where the company is a member of a group, the £20million threshold will be divided by the number of companies in the group. Affected companies will be required to pay their quarterly instalments in the third, sixth, ninth and twelfth months of the accounting period in which the profits arise.
For large companies and corporate groups affected, this acceleration of corporation tax payment will represent a significant cashflow hit. It will also mean that such companies will need to ensure that their tax computation process is efficient and accurate in order to avoid incurring significant interest charges.