Syllabus A. UK Tax System & Administration A4. The Time Limits

A4c. Claims 3 / 4

Syllabus A4c)

Explain how large companies are required to account for corporation tax on a quarterly basis and compute the quarterly instalment payments.

Claims to reduce POAs - anytime before next 31 January

The taxpayer would do this if he expects the taxable income to be lower this year than last (as last years was used to calculate the POA)

The grounds for the claim must be made

If the actual taxable income ends up being higher then interest will be charged on the underpaid POA tax, and a penalty if the reduction in POA was fraudulent (and not an innocent error)

Payment of Tax

  1. Companies pay tax by self assessment

  2. Estimated tax is payable 9 months and one day after the end of each accounting period (due date), with provisions for quarterly instalment payments for ‘large’ companies. 

    Payment must be made electronically

  3. Interest due to the HMRC on tax paid late will run from the due date to the date of payment at a rate of 2.75% per annum.

  4. Interest on overpayments of tax will run from the later of the due date or the date tax was actually paid at a rate of 0.5% per annum.

  5. Under self assessment interest on tax paid late will be deductible against interest receivable.

    Interest received on overpaid corporation tax will be taxable as Interest receivable

Quarterly Instalments

  1. Quarterly instalments apply to large companies.

  2. A large company is one with a profit exceeding £1.5M based on a single company with no related 51% group companies and which prepares accounts for a 12 month period. 

    The profit limit must be divided by the number of 51% related group companies and time apportioned for a chargeable accounting period of less than 12 months.

  3. The instalments are based on the estimated current year’s liability.

  4. The four quarterly instalments will be made in months 7, 10, 13 and 16 following the start of the accounting period. 

    The instalments are due on the 14th of the month. 

    Thus for the accounting year ended 31 March 2021 the first quarterly instalment payment would be due October 14 2020 followed by further payments due January 14 2021, April 14 2021 and July 14, 2021

  5. Quarterly payments are not required if the company was not large in previous CAP.