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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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CTSA: quarterly instalments: special cases

Regulation 3 (3) (see CTM92505) contains an exemption to protect certain companies from having to make quarterly instalment payments.

Under these provisions a company does not have to make quarterly instalment payments if both:

  • its profits for the accounting period do not exceed £10 million,

and

  • it was not large in the twelve months preceding the accounting period (except because of the operation of this exemption).

One effect of this is that growing companies are not quarterly instalment payment cases for the first accounting period in which they are ‘large’, unless the growth is very substantial.

‘Profits’ means the same as it does in CTM92520. You reduce the £10 million limit:

  • for accounting periods of less than twelve months proportionately,

and

  • by the number of associated companies plus one.

You count associated companies for this purpose:

  • as at the day before the start of the accounting period,

or

  • on the first day of the accounting period if the previous day did not fall within an accounting period.

You do not count companies that are excluded under ESC C9.

You do not treat a company as large in the twelve months preceding the accounting period if:

  • there is any part of that twelve months in which it did not exist or did not have an accounting period,

or

  • an accounting period in which it was not a large company (except because of the operation of this exemption) falls or ends within that twelve-month period.

Example 1 shows a company that is ‘large’ by reference to the upper limit and the level of profits. Nevertheless, it does not need to make quarterly instalment payments if it was not large in the previous accounting period.

Example 2 shows three accounting periods of a company. In the first the company is not large by reference to the upper limit. In the second it is not large because it was not large in the previous accounting period. In the third it is large and must make quarterly instalment payments.

Example 1

  • Company C has five associated companies. Its profits for the 12 month accounting period ended 31.1.2011 are £260,000 and the tax liability £72,000.
  • On these figures C is a large company for this accounting period. If it was not a large company during the previous 12 months it is not a large company for this period.

Example 2

  • Company D, with nine associated companies, has the following profits for accounting periods of 12 months:
Accounting period ended Profits Liability
     
31.12.2008 £200,000 £56,000
31.12.2009 £140,000 £39,200
31.12.2010 £160,000 £44,800
31.12.2011 £170,000 £47,600

Company D is not large for either the 2009 or the 2010 accounting period because:

  • for 2009 its profits do not exceed the upper limit of £1,500,000 / 10 = £150,000.
  • for 2010, although its profits do exceed that figure, it was not a large company during the previous 12 months.

Company D is large for the accounting period ended 31.12.2011 because:

  • its profits exceed the upper limit and in the previous 12 months it was only treated as not large under the Regulation 3 (3) exemption.