Payment of Corporation Tax

The method of corporation tax payment depends on the size of the company. Large and very large companies must pay their corporation tax in instalments, while all other companies are required to pay their full tax liability nine months and one day after the end of each accounting period.

Instalment Payments for Large and Very Large Companies

For large and very large companies, the requirement to make quarterly instalment payments is based on an estimate of the current year’s corporation tax liability, which is typically calculated from the management accounts. These payments are made in instalments on specified due dates.

Large and very large Companies

A company is classified as "large" if its total trading profits, including dividends from non-group companies, exceed £1.5 million but do not exceed £20 million. If a company has profits over £20 million, it is considered a "very large" company.

The £1.5 million and £20 million thresholds are proportionally reduced if the accounting period is shorter than 12 months or if the company has associated companies.

Non-group companies refer to those not within a 51% group, meaning they are not subsidiaries where the receiving company holds more than 50% of the profits, assets, and ordinary share capital.

When a company qualifies as large for the first time in an accounting period, it receives a one-year grace period with a £10 million threshold. This allows growing companies to transition to quarterly payments before they reach the full quarterly instalment requirement.

Instalment Payment Dates for Large Companies

For large companies, the due dates for instalment payments are as follows:

• The first instalment is due on the 14th day of the seventh month of the accounting period.

• Subsequent payments are due every three months after the previous one.

• The final payment is due three months and 14 days after the end of the accounting period.

  
  

To summarize, for a company with a 12-month accounting period, the first instalment is due on the 14th day of the seventh month of the period. The following three instalments are due at three-month intervals.

Example:

If the company's accounting period ends on 31 March 2024, the due dates

would be:

• 14 October 2023

• 14 January 2024

• 14 April 2024

• 14 July 2024

  
  

Amount Due by Instalments for Large Companies

Each instalment is calculated based on the estimated corporation tax liability for the current accounting period, even though the company may be partway through the period when making the first payment. Each instalment is generally 3/12ths of the estimated total corporation tax liability for a 12-month period.

However, if a company’s corporation tax liability is £10,000 or less, it will not be required to pay tax in instalments, regardless of its profits. If the accounting period is shorter than 12 months, the £10,000 threshold is reduced accordingly.

Instalment Payment Dates for Very Large Companies

Very large companies are required to make instalment payments on the 14th day of the 3rd, 6th, 9th, and 12th months of the accounting period. For a year ending 31 March 2024, the due dates would be:

• 14 June 2023

• 14 September 2023

• 14 December 2023

• 14 March 2024

  
  

Similar to large companies, each instalment for very large companies is calculated as 3/12ths of the estimated corporation tax liability for a 12-month period. As is the case with the large company, if the corporation tax liability is less than £10,000, no instalment payments are required regardless of companies profits.

Speak to an Expert

This article provides a general overview of corporation tax payment requirements. If you need tailored advice for your specific situation, please contact our tax team for assistance.

Authored by: London Tax Team