Pay Corporation Tax if you’re a large company
How to work out payments and when you should make them if your company’s annual taxable profits are between £1.5 million and £20 million.
If your company’s profits for an accounting period are at an annual rate of more than £1.5 million, you must normally pay your Corporation Tax for that period electronically and in instalments.
If you have a profit of over £20 million, there are different rules you must follow.
Large companies
A large company is one whose profits for the accounting period in question are at an annual rate of more than £1.5 million but less than £20 million.
Generally ‘large’ companies must pay their Corporation Tax electronically by instalments.
Exceptions
Your company does not have to pay by instalments for an accounting period - even though its profits exceed £1.5 million - if either:
- the amount of its total liability for the accounting period is less than £10,000 (or where the accounting period is less than 12 months, less than an annual rate of £10,000)
- its profits for the accounting period do not exceed £10 million and either of the following applies:
- at any time during the previous 12 months it did not exist or did not have an accounting period
- for any accounting period which ended in the previous 12 months, either its annual rate of profit did not exceed £1.5 million or its annual rate of tax liability did not exceed £10,000
If either of these conditions apply then the company must pay its tax in full by the normal payment due date.
Accounting periods ending before 1 April 2015
If your company has associated companies for accounting periods ending before 1 April 2015, the £1.5 million and £10 million thresholds are reduced by dividing the annual rates by the number of associated companies plus one.
This new figure is the annual threshold for your company.
Example
A company has 5 associated companies. Its profits for the 12 month accounting period ending 30 November 2009 are £300,000 and its Corporation Tax liability is £55,000.
£1.5 million divided by 6 (that is, 5 + 1) = £250,000.
The company is a large company for this accounting period. Even though its profits are less than £1.5 million, they exceed the adjusted annual threshold of £250,000 and its tax liability is greater than £10,000.
A company is associated with another company if:
- one is under the control of the other
- both are under the control of the same person or persons
Control is usually defined by reference to ownership of share capital, or voting power.
A company may be an associated company no matter where it’s resident for tax purposes.
Accounting periods ending on or after 1 April 2015
For accounting periods ending on or after 1 April 2015, the associated companies rules have been replaced by a 51% group test.
If the company has related 51% group companies, the £1.5 million and £10 million thresholds are reduced by dividing the annual rates by the number of related 51% group companies plus one.
This new figure is the annual threshold for your company.
Company A is a related 51% group company of company B if:
- A is a 51% subsidiary of B
- B is a 51% subsidiary of A
- A and B are 51% subsidiaries of the same company
‘A’ is a 51% subsidiary of ‘B’ if more than 50% of its ordinary share capital is beneficially owned (directly or indirectly) by ‘B’.
Example
A company has 4 related 51% group companies. Its profits for the 12 month accounting period ending 30 April 2016 are £400,000 and its Corporation Tax liability is £80,000.
The annual adjusted threshold is: £1.5 million divided by 5 (that is, 4 + 1) = £300,000.
Although the profits for the accounting period are below £1.5 million, the profits exceed the adjusted annual threshold of £300,000.
As the tax liability also exceeds £10,000, the company is large for the accounting period.
When instalment payments have to be paid
The dates when you’ve to pay your instalment payments of Corporation Tax, and the number of payments, depend on whether you are a large or very large company and the length of your accounting period.
For accounting periods of 12 months, you’ll normally pay your Corporation Tax in 4 quarterly instalments, 2 of which are due before the end of your accounting period.
Accounting periods of 12 months
If your company has a 12 month accounting period, you’ll have to pay in 4 equal instalments due:
- 6 months and 13 days after the first day of the accounting period
- 3 months after the first instalment
- 3 months after the second instalment (14 days after the last day of the accounting period)
- 3 months and 14 days after the last day of the accounting period
This applies to accounting periods ending after 30 June 2002.
Example
Instalment payment dates for an accounting period 1 January 2016 to 31 December 2016.
| Payment | Payment due date |
|---|---|
| First payment | 14 July 2016 |
| Second payment | 14 October 2016 |
| Third payment (due after the end of the accounting period) | 14 January 2017 |
| Final payment | 14 April 2017 |
Accounting periods less than 12 months
If your company has an accounting period less than 12 months, your last instalment will be due 3 months and 14 days after the last day of your accounting period.
If your accounting period is longer than 3 months, the first payment will be due 6 months and 13 days after the first day of the accounting period.
If your accounting period is long enough, other payments will also be due at 3 monthly intervals after then.
Example
Instalment payment dates for an accounting period 1 January 2017 to 31 August 2017.
| Payment | Payment due date |
|---|---|
| First payment | 14 July 2017 |
| Second payment due after the end of the accounting period | 14 October 2017 |
| Final payment | 14 December 2017 |
Example
Instalment payment dates for an accounting period 1 January 2017 to 31 March 2017.
| Payment | Payment due date |
|---|---|
| All Corporation Tax is due in a single instalment | 14 July 2017 |
Work out instalment payments
Step 1: estimate your company’s total liability
To work out your instalment payments, first estimate your Corporation Tax liability for the accounting period, including any tax due on:
- loans to directors and other participators in ‘close’ companies
- Controlled Foreign Companies
Then deduct all reliefs and set-offs to arrive at your company’s total liability, as you would when calculating your Corporation Tax due on your Company Tax Return.
Use this figure to work out your instalment payments.
Step 2: work out the amount of each instalment
For a 12 month accounting period you pay your total liability in 4 equal instalments, each instalment is a quarter of your company’s total liability.
For accounting periods of 3 months or less make 1 single payment of your company’s total liability.
For accounting periods longer than 3 months but less than 12, all instalments except the last will be the company’s total liability divided by the number of months in the accounting period times 3.
The last instalment will be your company’s total liability less the payments made so far.
Example
Calculating instalment payments for a company with an accounting period 1 January 2017 to 31 August 2017 and Corporation Tax to pay of £900,000.
| Calculation step | Result |
|---|---|
| Company’s total liability | £900,000 |
| Months in the accounting period | 8 |
| Company’s total liability ÷ months in the accounting period x 3 | £900,000 ÷ 8 x 3 = £337,500 |
| Smaller of company’s total liability and company’s total liability ÷ months in the accounting period x 3 | £337,500 |
| First and second instalment payments | £337,500 |
| Third and final payment | £900,000 - (2 × £337,500) = £225,000 |
Step 3: revise your estimate and adjust your payments
Your estimate of your Corporation Tax liability may change as the accounting period progresses. This may even happen after your last instalment payment. You’ll need to work out each instalment payment based on the revised figure.
If you think your liability is going to be greater than your earlier estimates, you’ll have to make one or more ‘top-up’ payments to cover the shortfall in your previous instalments. You can make additional payments at any time. You may have to pay interest if you’ve made instalment payments that turn out to be lower than your actual liability.
If you later find that you’ve paid too much (or should not have made a payment at all), you’ll normally be able to claim back your overpayment, or you can leave the overpayment with HMRC and deduct the overpayment from future instalment payments.
You might receive interest on overpayments of instalment payments and on payments made early.
Ring fence companies
If your company is liable to Corporation Tax and supplementary charge on profits from ring fence activities (UK Continental Shelf oil-related activities that under UK law constitute a separate trade) then you’ll pay any Corporation Tax due on non-ring fence profits in instalments using the normal rules.
For accounting periods beginning on or after 1 April 2019, if your profits exceed £20 million, you will pay any tax due on non-ring fence profits by instalments using the very large company rules.
You’ll also have to pay the Corporation Tax and supplementary charge on your ring fence profits in a maximum of 3 equal instalments due:
- 6 months and 13 days after the first day of the accounting period
- 3 months after the first instalment
- 14 days after the last day of the accounting period
This applies to accounting periods ending after 30 June 2005.
For 12 month accounting periods ending after 30 June 2005 but before 1 July 2006, instalments are 25%, 25% and 50% of the ring fence liability.
Example
Ring fence instalment dates for an accounting period 1 January 2017 to 31 December 2017.
| Payment | Payment due date |
|---|---|
| First payments of both ring fence tax and other Corporation Tax | 14 July 2017 |
| Second payments of both ring fence tax and other Corporation Tax | 14 October 2017 |
| Third (final) payment of ring fence tax, and third payment of other Corporation Tax | 14 January 2018 |
| Final payment of other Corporation Tax | 14 April 2018 |
Example
Ring fence instalment dates for an accounting period 1 January 2017 to 31 May 2017.
| Payment | Payment due date |
|---|---|
| All ring fence tax is due on this date | 14 June 2017 |
| First payment for other Corporation Tax | 14 July 2017 |
| Second (final) payment for other Corporation Tax | 14 September 2017 |
The date the third instalment would be due (14 June 2017) falls before any of the other payment due dates, then all the ring fence tax is due is payable on 14 June 2017.
Work out instalment payments for ring fence companies
If your company is liable for Corporation Tax and supplementary charge on profits from ring fence activities, work out instalments for Corporation Tax due on non-ring fence profits using the normal rules.
You’ll also have to work out your instalments for the Corporation Tax and supplementary charge on your ring fence profits.
Step 1: work out your ring fence amount
Estimate the ring fence Corporation Tax and supplementary charge payable for the accounting period.
Step 2: work out your instalment payments
For a 12 month accounting period you pay your total liability in 3 equal instalments, each one a third of the ring fence amount.
For accounting periods of 4 months or less you make 1 single payment of your total liability.
For accounting periods longer than 4 months but less than 12 your payments are the smaller of the balance of the ring fence amount unpaid or the ring fence amount divided by the number of months in the accounting period times 4.
These rules apply for accounting periods ending on or after 1 July 2006.
If you want to check calculations for accounting periods ending after 30 June 2005 but before 1 July 2006, use the formula:
ring fence amount ÷ the number of months in the accounting period for shorter periods x 3.
Step 3: revise your estimate and adjust your payments
Your estimate of your Corporation Tax liability may change as the accounting period progresses. This may even happen after your last instalment payment. You’ll need to work out your instalment payments based on the revised figure.
If you think your liability is going to be greater than your earlier estimates, you’ll have to make one or more ‘top-up’ payments to cover the shortfall in your previous instalments. You can make additional payments at any time. Be aware that you may have to pay interest if you’ve made instalment payments that turn out to be lower than your actual liability.
If you later find that you’ve paid too much (or should not have made a payment at all), you’ll normally be able to claim back your overpayment, or you can leave the overpayment with HMRC and deduct the overpayment from future instalment payments. You might receive interest on overpayments of instalment payments and on payments made early.
Groups of companies
Group companies can choose to offset an amount overpaid by one company against an amount unpaid by another company in the group.
HMRC also offers Group Payment Arrangements, which allow groups to make instalment payments on a group-wide basis. You can nominate one company in the group to pay the instalments on behalf of the group, rather than company by company.
Make an instalment payment
You must make all Corporation Tax and related payments electronically.
Related payments include interest charged on overdue Corporation Tax and penalties for not filing your Company Tax Return on time.
Pay your instalment payments electronically online using:
- Direct Debit
- debit card
- company credit card
- your own bank or building society’s internet banking service
Pay electronically but not online using:
- Bacs Direct Credit
- your own bank or building society’s telephone banking service
- CHAPS
- Bank Giro
Interest and instalment payments
Interest charged by HMRC
HMRC charges interest on late or underpaid instalments. If you have to pay this interest, it’s tax deductible for Corporation Tax purposes. This interest is called debit interest by HMRC, to distinguish it from interest on normal late payments.
This interest is only worked out and charged when you submit your Company Tax Return.
Interest paid to you
HMRC will pay your company interest if:
- you make instalment payments that turn out to be unnecessary
- you pay them early
- your payment is too high
Any interest paid will be worked out from the later of the first instalment date or the point where an overpayment arises.
The interest paid by HMRC is taxable for Corporation Tax purposes. This interest is only worked out and charged retrospectively, once the liability for the period is established, normally when you submit your Company Tax Return.
The rate for this interest is different from the rate of interest charged on late payments and underpayments. This interest is called credit interest by HMRC.
Example
A company with no ring fence liability has an accounting period from 1 January to 31 December.
It reviews the estimate of its final liability at regular intervals and, when appropriate, adjusts its instalment payments (or, if necessary, makes top-up payments) to minimise any interest charge. It sends its Company Tax Return showing a final tax liability of £120 million.
| Company’s estimate of its liability | Payments made based on estimated figures (with date payment made) | Actual liability based on final liability | Date due |
|---|---|---|---|
| £80 million | £20 million (14 July) | £30 million (instalment payment 1) | 14 July |
| £110 million | £35 million (14 October) | £30 million (instalment payment 2) | 14 October |
| £130 million | £10 million (top-up payment) (1 November) | ||
| £140 million | £40 million (14 January) | £30 million (instalment payment 3) | 14 January |
| £120 million | £15 million (14 April) | £30 million (instalment payment 4) | 14 April |
In this example, interest is due as follows:
| Dates | Total paid to date | Actual liability to date | Details of interest due |
|---|---|---|---|
| 14 July to 13 October | £20 million | £30 million | Debit interest due on £10 million from 14 July to 13 October |
| 14 October to 31 October | £55 million | £60 million | Debit interest due on £5 million from 14 October to 31 October |
| 1 November to 13 January | £65 million | £60 million | Credit interest due on £5 million from 1 November to 31 January |
| 14 January to 13 April | £105 million | £90 million | Credit interest due on £15 million from 14 January to 13 April |
| 14 April | £120 million | £120 million | No further interest will be charged or credited |
Penalties on instalment payments
A penalty may be charged if you deliberately:
- fail to make instalment payments
- make instalment payments that are too small
Repayment claims
If, following a review at the next instalment date of the latest management accounts and forecasts, you find that your Corporation Tax liability will be less than expected, you can make a claim for repayment of some or all of your instalment payments.
Claims must be made to an officer of HMRC and must state both:
- the amount that you consider should be repaid
- your grounds for believing that, because of a change in circumstances since the payment or payments were made:
- the amount of your total liability for the period is likely to be less than previously calculated
- the cumulative payments exceed the revised calculation of the liability
In some circumstances, you may make a repayment claim where the revised calculation of your liability includes anticipated losses from your current accounting period that has not yet ended.
This may occur where you have sustained significant losses. You will need to provide supporting evidence to verify the losses and support your claim for repayment. Find out more information about repayment claims.
Last updated 16 June 2020 + show all updates
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Guidance updated with information on repayment claims if your Corporation Tax liability is less than expected due to exceptional circumstances.
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Guidance on paying by instalments if your annual profits are over £20 million has been added.
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Guidance updated to show it won't be possible to make a payment with a personal credit card from 13 January 2018.
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The Corporation Tax (Instalment Payments) (Amendment) Regulations 2014 (SI 2014/2409)) has been amended and will apply to accounting periods ending on or after 1 April 2015.
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First published.