Paying Corporation Tax in Instalments for Large Companies

10 months, 3 weeks ago by Oliver Atkinson

When a company’s profits for an accounting period exceeds £1.5 million it will be considered a large company by HMRC and will need to pay Corporation Tax in four instalments at certain dates during the year.

For a normal 12-month accounting period payments would be due:

1. 6 months and 13 days after the start of your accounting period
2. 3 months after the first payment
3. 3 months after the second payment
4. Final payment due 3 and a half months after the end of your accounting period

Because you won’t know the actual liability until you’ve completed your company’s accounts you will need to make your first three payments based on estimates of what you think the total liability will be and divide it into four payments to be made on the above dates.

You can do this using by reviewing your profit halfway through the year, doubling it, to work out your estimated annual liability, and divide it into four payments.

At the end of the accounting period, when you produce the accounts, you can work out, and pay, the difference.

An accounting period will usually be 12 months but can be less. If, for example, you move your year end date 6 months later and therefore have accounts for 18 months you will need to submit Corporation Tax returns for two accounting periods of 6 months and 12 months. Payments for accounting periods less than 12 month are due:

1. 6 and a half months after the start of your accounting period
2. 3 months after the first payment (if the accounting period is long enough)
3. Final payment due 3 and a half months after the end of your short accounting period

In the above case the first Corporation tax payment, for a short 6 month accounting period, would be due 6 and a half months after the start of the accounting period and the final payment would be due 3 and a half months after the end of the accounting period.

However, there are exceptions where you will not need to pay in instalments even if your profits exceed £1.5 million:

• Where the total liability for the period is less than £10,000.00
• Where previously the company was not considered ‘large'

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