On 7 November 2017, regulations accelerating the date when “very large” companies must pay corporation tax by instalments, were made.
For accounting periods that begin on or after 1 April 2019, companies with annual taxable profits above £20m will need to make quarterly instalment payments of tax in the 3rd, 6th, 9th and 12th month of the current accounting period, effectively four months earlier than previously.
Where a company is a member of a 51% group, the £20m threshold is divided by the number of companies in the group.
Currently, companies with annual taxable profits of over £1.5m 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.
The aim is to ensure that the largest companies pay tax closer to the point at which they earn their income, and bring the UK’s system for payment of corporation tax more into line with those already operating in other G7 countries.
Despite the obvious windfall for HMRC this measure is expected to present companies affected by this with significant cash flow problems in the transition year owing to the number of payments to be made in the short time period.
If you would like assistance with Corporation Tax compliance, please call Vicky Tunaley on Rugby 01788 539000 or Jon Kicks on Leicester 0116 261 0061.