Quarterly tax payments

Summary for "large" and "very large" companies

Companies defined as “large” or “very large” are required to pay their tax in advance and by instalments, called quarterly instalment payments (“QIPs”). Different rules apply if the company meets the criteria to be considered large or very large.

Large companies

A company will be considered large for these purposes if their taxable profits are greater than £1,500,000 in a given accounting period (that is a full year in length). This threshold is reduced proportionally for shorter periods, and divided by the number of related group companies at the end of the prior period).

For example:

  • In a six month accounting period the QIP threshold for a company will be £750,000;
  • If, in a 12 month period, a company has three related group companies, the threshold is reduced to £375,000 (being £1,500,000 divided by 4 total group companies, including the company itself).

If a company is considered “Large” for these purposes it may be required to pay its tax by QIPs, unless its tax liability is less than £10,000 (reduced based on the length of the period.
Payments would be due as follows:

  1. 14th day of 7th month of the relevant period;
  2. 14th day of 10th month of the relevant period;
  3. 14th days after the end of the relevant accounting period; and
  4. 3 months and 14 days after the end of the relevant accounting period.

For example, a “large” company with an accounting period being the year ended 31 December 2020:

Large Companies QIP regime Date due
  • QIP 1 = 14 July 2020
  • QIP 2 = 14 October 2020
  • QIP 3 = 14 January 2021
  • QIP 4 = 14 April 2021

The rules vary where an accounting period is shorter than 12 months. As a rule, the first QIP will always be due 6 months and 14 days after the beginning of the relevant period, and the final QIP will be 3 months and 14 days after the end of said period. Therefore, a company may not necessarily have four QIPs due, and the tax would therefore be spread depending on the number of payments.

Amounts Due

If four QIPs are due, QIP 1 should equal 25% of the total estimated tax liability for the year.
For QIPs 2-4 the company should also adjust for any under/over payments for the earlier QIP amounts e.g. as the forecast profits change.

Grace Period Exemption

In the first period the company became Large, for these purposes, the company has a “year of grace” before entering the QIP regime provided its taxable profits are forecast to be less than £10,000,000, (divided by the number of 51% group companies). It will be required to pay QIPs in the next year if it continues to breach the profit threshold detailed above.

Quarterly tax payments thumbnail
Very large companies

For accounting periods beginning on or after 1 April 2019 where a company’s annual taxable profits exceed £20 million (even if for the first time) it will fall immediately into the new “Very Large” regime for that accounting period, i.e. there is no ‘period of grace’.

“Very large” companies for these purposes will be required to make payments four months earlier than they are currently required to do (as detailed above), and should base this off of forecast tax figures.

For a 12-month accounting period, payments will therefore be due in months 3, 6, 9 and 12 of the period to which the liability relates, as opposed to months 7, 10, 13 and 16 under the current “large” company rules.

Our example of the company with a year end of 31 December 2020 is therefore impacted as follows:

New regime – y/e 31 Dec 2020
  • QIP 1 = 14 March 2020
  • QIP 2 = 14 June2020
  • QIP 3 = 14 September 2020
  • QIP 4 = 14 December 2020

As with the “Large” QIP rules, the £20,000,000 threshold is adjusted if the company is a member of a group or has an accounting period shorter than 12 months.

For example if there are 5 related group companies in the group the threshold for the new regime rules to be applicable will be, £20 million divided by 5, i.e. £4 million.

Payments of the bank levy by financial services companies or ring fence corporation tax (CT) by oil and gas companies will be unaffected by these changes.

If you need any help or advice calculating your company’s estimated taxable profits, or want any further advice regarding quarterly instalment payments. Please contact a member of our team.

For more information

For more information on quarterly tax payments, please contact a member of our tax team on:

01483 416232