Are you now classed as ‘very large’ for Corporation Tax purposes?
Companies that are classed as ‘large’ by HMRC are required to pay their Corporation Tax (CT) in quarterly instalments. From 1st April 2019, ‘very large’ companies will be mandated to pay CT instalments earlier than large companies. Does this apply to your business?
What’s ‘very large’?
For accounting periods that begin on or after 1st April 2019 HMRC will categorise ‘very large’ companies as those with taxable profits of more than £20 million.
Are you part of a group?
Even if your company’s taxable profits are well below the £20m profit limit, you could find that it is still treated as “very large” if it’s part of a group. This is because the £20m limit is reduced by dividing the limit by the number of related 51% group companies (including the company itself). So if the company’s profits are more than this reduced threshold, then it could still be classed as very large.
If your company’s profits do exceed the limit, then you will be required to pay the CT bill in instalments.
The first is due two months and 13 days after the first day of the accounting period (compared to six months for large companies) with the payments quarterly after that.
This means if your accounting period starts on 1 April 2019, the first instalment payment would be due on 14 June 2019 with subsequent payments due on 14 September 2019, 14 December 2019 and 14 March 2020.
For the first year of the rule change, you will need to plan for the impact this amendment will have on your cash flow. This is because you will be effectively be paying half your CT bill in the same month – your first CT instalment for the current year is due on 14 June 2019 and your last instalment for the prior year will be due on 14 July 2019.
You can find further guidance on these changes for Corporation Tax on the gov.uk website.
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