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HMRC internal manual

Company Taxation Manual

CTSA: quarterly instalments: large companies

A company is ‘large’ for the purposes of quarterly instalment payments if its profits for an accounting period exceed the “upper limit” in force at the end of the accounting period. The way in which the “upper limit” is arrived at changed for accounting periods ending on or after 1 April 2015.

For accounting periods ending before 1 April 2015, the “upper limit” is the CTA10/S24 amount of the upper relevant maximum amount (URMA) in force at the end of the accounting period.  For financial years up to 2014, this was £1,500,000. As with CTA10/S24:

  • ‘Profits’ means profits chargeable to CT plus franked investment income received other than from a company in the same group;
  • The upper limit is reduced proportionately when the accounting period is less than twelve months;
  • The upper limit when the company has associated companies is reduced by dividing it by the total number of companies associated, including the reference company.

 

In considering the number of associated companies, follow the guidance at CTM03570.

For accounting periods ending on or after 1 April 2015, the “upper limit” is set by SI1998/3175 (as amended by SI2014/2409) at £1,500,000. The “upper limit” is adjusted as follows:

  • ‘profits’ means profits chargeable to CT plus franked investment income received other than from a company in the same group,
  • the “upper limit” reduces proportionately when the accounting period is less than twelve months,
  • the “upper limit” is reduced by dividing the number of related 51 per cent group companies, including the reference company.

A related 51 per cent group company is defined in CTA10/S279F to S279H. For this purpose, “A” is a related 51 per cent group company of “B” if:

  • A is a 51 per cent subsidiary of B,
  • B is a 51 per cent subsidiary of A, or
  • A and B are 51 per cent subsidiaries of the same company.

“51 per cent subsidiary” takes its meaning from CTA10/S1154, that is, A is a 51 per cent subsidiary of B if more than 50 per cent of its ordinary share capital is beneficially owned (directly or indirectly) by B.

Two companies are related 51 per cent group companies of a company even if they are related 51 per cent group companies for different parts of that company’s accounting period. For example, company C has an accounting period from 1 April 2015 to 31 March 2016.  A is a 51 per cent subsidiary of C from 1 April 2015 to 30 June 2015.  B is a 51 per cent subsidiary of C from 1 July 2015 to 31 March 2016. A and B are both related 51 per cent group companies of C for its  accounting period from 1 April 2015 to 31 March 2016.

A related 51 per cent group company is ignored if it did not carry on a trade or business during the accounting period, or if it was only a related group company for part of an accounting period, if it did not carry on a trade or business in that part of the accounting period.  Whether a trade or business is carried on should be decided on the same basis as for associated companies, and the guidance at CTM03590 should be followed.

 

A company is not ‘large’ if its total liability does not exceed £10,000.  This limit is proportionately reduced if the accounting period is less than 12 months.

Example 1 is a case that is not ‘large’ because of the level of profits.

Example 2 is a case that is not ‘large’ because its total liability does not exceed £10,000 although its profits are more than the upper limit.

Example 1

  • Company A has five associated companies.  Its profits for the 12 month accounting period ended 30 November 2011 are £200,000 and the tax liability £56,000.
  • Company A is not a large company for this accounting period because its profits do not exceed the upper limit of £1,500,000 / 6 [1 + 5] = £250,000.

Example 2

  • Company B has five 51 per cent related group companies.  Its profits for the 12 month accounting period to 31 December 2016 are £260,000 and the tax liability £9,500.
  • Company B is not a large company for this accounting period.  Although its profits exceed the upper limit its tax liability does not exceed £10,000.