Gursharan (Sharan) joined Ward Williams in 2023 as our Corporate Tax Manager. She started her career in tax in 2017 as a tax trainee and is ATT qualified.
Should my company be making QIPs (Quarterly Instalment Payments)?
- If your company makes profits of over £1.5m then the answer is probably “yes”
- You need to consider new rules from 1 April 2023 that bring “associated” companies into play, and may mean more companies fall into the QIPs regime
- Companies falling into QIPs need to be mindful of payment dates to manage cashflow
The Corporation Tax (CT) rate is currently 19-25%. Most companies pay their CT liability nine months and one day after the end of the accounting period.
If your company has augmented profits (taxable profits plus any exempt dividends from non group companies) between £1.5 million and £20 million in an accounting period, the company may be required to pay in instalments (QIPs).
Who must pay by QIPs?
Companies with profits between £1.5 million and £20 million are deemed to be “large companies”. Companies with profits over £20m are deemed to be “very large”.
Large and very large companies must pay QIPs unless they fall into one of the following exemptions:
- the total liability for the accounting period is less than £10,000 (where the accounting period is less than twelve months, the £10,000 is apportioned)
- profits for the accounting period do not exceed £10 million and either of the following applies:
- This is the first year the company has traded or existed
- for any accounting period which ended in the previous twelve months, the tax liability did not exceed £10,000 or the company was not large
What affects the thresholds?
- Number of associated companies
Pre-1 April 2023 if a company had 51% related companies the thresholds of £1.5 million and £20 million would be reduced accordingly. From 1 April 2023 the 51% related group company rule was replaced to consider the number of associated companies.
A company is associated with another company if one controls the other, or if the same person or group of persons control them both. The new rule means you do not just look at the number of shares an individual shareholder owns, you must also add in shares held by their ‘associates’, eg close family members such as a parent or sibling.
If Company A has 3 associated companies, the £1.5 million and £20 million thresholds are divided by four, meaning if any of the companies have profits within £375,000 and £5 million, they may fall within the QIPs regime.
- If the accounting period is less than twelve months
The £1.5 million and £20 million thresholds are apportioned if the accounting period is less than twelve months.
If Company B has a ten month accounting period, the £1.5 million threshold would reduce to £1.25 million and the £20 million would reduce to £16,666,667.
When do QIPs have to be paid?
For large companies with a twelve-month accounting period, the CT liability will usually be paid in four quarterly instalments as follows:
- 1st instalment due 6 months and 13 days after the start of the accounting period
- 2nd instalment due 3 months after the first instalment
- 3rd instalment due 3 months after the second instalment
- 4th instalment 3 months and 14 days after the last day of the accounting period
For very large companies, the first instalment is due 3 months and 13 days after the start of the account period, with the remaining instalments at interval of 3 months. This means all payments are paid within the accounting period.
Company C has a 31 December 2022 and is deemed to be large payments will be due as follows:
- 1st instalment - 14 July 2022
- 2nd instalment - 14 October 2022
- 3rd instalment - 14 January 2023
- 4th instalment - 14 April 2023
If company C was deemed to be very large the payments will be due as follows:
- 1st instalment - 14 March 2022
- 2nd instalment - 14 June 2022
- 3rd instalment - 14 September 2022
- 4th instalment - 14 December 2022
If you have queries or would like to discuss this further, please contact Gursharan Sappal or Katherine van Eyken on 01932 830664 or email firstname.lastname@example.org.