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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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CTSA: quarterly instalments: intra-group surrender: examples

Example 1

  • Company A and Company B are members of the same group for the purposes of CTA10/S963.
  • They both have an accounting period from 1 August 2009 to 31 July 2010.
  • Both companies are believed to be liable to make quarterly instalment payments.

They make payments as follows:

  Company A Company B
     
14 February 2010 £10,000 £150,000
14 May 2010 £8,000 £160,000
14 August 2010 £5,000 £170,000
14 November 2010 £1,000 £192,000
Total Paid * * *  

£24,000


  * * *

£672,000


 

The total payments at 14 November 2010 reflect:

  • estimated CT liabilities of £40,000 for Company A,
  • estimated CT liabilities £1.12m for Company B.

On 28 June 2011 both companies file their returns showing:

  • Company A’s profits are below the upper limit, so it was not liable to make quarterly instalment payments. Its tax liability is computed at £34,420.
  • Company B’s liability is £1.2m.

The quarterly instalment payments that Company B should have made, based on a total liability of £1.2m are four instalments of £300,000. So Company B’s cumulative underpayment of instalments is:

  Cumulative amount due Cumulative amount paid Cumulative underpayment
       
14 February £300,000 £150,000 £150,000
14 May £600,000 £310,000 £290,000
14 August £900,000 £480,000 £420,000
14 November £1,200,000 £672,000 £528,000
  • Company A and Company B give joint notice of surrender. (No notice under CTA10/S963 (6C) is needed because Company A’s claim relates to all the tax it has paid.)
  • The instalment tax paid by Company A (£24,000) is treated as paid by Company B on the dates on which Company A paid it.
  • Company A is treated as if the tax had been repaid to it on those dates.

It follows that:

  • Company A is treated as not having made any quarterly instalment payments,
  • Company A’s tax liability becomes due on 1 May 2011, the normal CT due date,
  • Company B needs to pay a further £504,000 without delay, to bring its total instalment payments (including the refund surrendered by Company A) up to £1,200,000.

Example 2

  • Company C and Company D are members of the same group for the purposes of CTA10/S963.
  • They both have an accounting period 1 August 2009 to 31 July 2010.
  • Both are liable to make quarterly instalment payments.

They estimate their liabilities and pay tax as follows:

  Company C Company D      
           
  Estimated liability payable in instalments Payments made Estimated liability payable in instalments Payments made  
14.2.10 £32m £8m £16m £4m  
14.5.10 £32m £8m £16m £4m  
           
Total payments so far   £16m   £8m  
           
  • On 1 July 2010 they revise their estimates of the liabilities to be paid by instalments to £28m and £20m respectively.
  • On this basis, the total amounts of the quarterly instalment payments due to date are £14m and £10m.

Company C can make a repayment claim of £2m under Regulation 6 (see CTM92650) because no tax is now believed to have become payable in instalments.

  • Company C claims repayment of £2m, which is surrendered to Company D.
  • Company C gives notice under CTA10/S963 (6C) that the £2m is to be treated as:
    • £1m paid on 14 February,
    • £1m paid on 14 May,
  • Company C is treated as if those amounts had been repaid to it on those dates and Company D is treated as having paid those amounts on those dates.