As of 1 April 2023, many companies may find they're now required to start paying their corporation tax up to 18 months earlier, due to an update in legislation meaning more companies will fall within the quarterly instalment payments regime. Read on to see if you'll be affected.
Who pays their corporation tax via quarterly instalment payments (QIPs)?
Profit-making companies ordinarily pay their corporation tax liability 9 months and 1 day after their accounting period end. However, companies that are 'large' (profits above £1.5 million) or 'very large' (profits above £20 million) will need to pay their tax earlier via QIPs. If within QIPs, a company will be required to start paying its corporation tax liability up to 18 months earlier.
What are the changes to the QIPs regime?
Since 2014 the large and very large profit limits for QIPs have been divided based on the number of related 51% group companies (broadly, the number of companies directly or indirectly linked by at least 51% control).
However, from 1st April 2023 the limits for QIPs are divided by the number of 'associated companies' (broadly, companies under common control even if they are not in a group). This increases the possibility of companies falling within the QIPs regime, which will result in bringing forward the corporation tax payment dates for those companies by several months. This change was introduced alongside an increase in the main rate of corporation tax from 19% to 25%.
Why is paying corporation tax on time important?
HMRC have continued to increase the interest rates charged on late and underpaid tax payments in line with the Bank of England's base rate of interest. It is therefore even more important now to make sure that the correct amount of tax is paid on time to avoid higher interest charges.
Originally published 1 April 2023
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