Whilst most companies in the UK pay corporation tax nine months after the end of their accounting period, some “large” companies need to pay corporation tax in four quarterly instalments based on an estimate of tax liability.
How do I estimate corporation tax liability?
You will need to estimate your current year tax liability net of any reliefs/set-offs and use this estimate to make quarterly payments. The tax authorities appreciate that your tax liability is likely to vary over time and allows for “top-up” payments at any time if your revised estimate suggests there is an additional tax liability Likewise, revisions can be made and refunds granted where there have been overpayments.
What is a “large” company?
Companies caught by quarterly instalment requirements are those with profits for the accounting period which exceed the upper relevant maximum amount (URMA) in force at the end of that period. The URMA is currently £1.5m and the corporation tax rate is 19%.
Some companies which are part of a group are considered large even though the individual entity’s corporation tax liability may be small. There is no requirement to make quarterly payments where the corporation tax liability is less than £10k.
A group payment arrangement facility allows groups to make instalment payments on a group-wide basis, rather than by individual company.
What about interest?
Interest paid is deductible and interest received is chargeable for tax purposes.
If you think you may be required to make quarterly instalments for corporate tax purposes or would like further advice on any aspect of corporation tax, please contact us.