UK and International Tax news

Changes To Corporation Tax Instalment Dates For Very Large Companies

Tuesday 16th February 2016

HMRC has recently issued its policy paper, draft legislation and an explanatory memorandum covering the proposed changes announced in the Summer 2015 Budget to the payment of corporation tax in instalments by companies with taxable profits of over £20m for accounting periods beginning on or after 1 April 2017.

Companies with annual taxable profits of over £1.5 million or, if a member of one or more 51% groups, a proportion of this amount pay CT in instalments. For an accounting period of 12 months, companies are currently required to make payments in months 7 and 10 for the accounting period to which the liability relates, and months 1 and 4 of the next accounting period.

For accounting periods beginning on or after 1 April 2017, companies with annual taxable profits exceeding £20 million in an accounting period will be required to pay instalments of CT four months earlier. For a company with a 12 month accounting period, instalments will be due in months 3, 6, 9 and 12 of the period to which the liability relates.

Where the company is a member of one or more 51% groups, the threshold of £20 million will be divided by the number of related 51% group companies plus 1. For example, if a company has 3 related 51% group companies, the threshold is £5 million (£20 million/(1+3)). This is the same way in which the threshold of £1.5 million for entering the instalment payment regime is apportioned. A company is a related 51% company of another if either company is a 51% subsidiary of the other, or both are 51% subsidiaries of a third company.

For companies with annual taxable profits of £20 million or less, payment dates will not change. For a 12 month accounting period, companies with taxable profits in excess of £1.5 million but £20 million or less will continue to make instalment payments in months 7 and 10 of the accounting period to which the liability relates, and months 1 and 4 of the next period. Companies with taxable profits of £1.5 million or less will pay CT 9 months and 1 day after the end of the accounting period.

Payment dates for the bank levy and CT and the supplementary charge for ring fence profits and adjusted ring fence profits of oil and gas companies will not be subject to the changes.

HMRC has requested comments on the draft legislation and explanatory memorandum by 26 February 2016.

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