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HMRC internal manual

COTAX Manual

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HM Revenue & Customs
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Payments: quarterly instalment payments: introduction

Quarterly instalment payments (QIPs) are governed by the Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998/3175) and made under the authority of S59DA(8) and S59E TMA70, Section 826A ICTA 1988 and Section 30 FA 1998. SI 1998/3175 was amended by the Corporation Tax (Instalment Payments) (Amendment) Regulations 1999 (SI 1999/1929). They were further amended by the Corporation Tax (Instalment Payments) (Amendment) Regulations 2000 (SI 2000 no.892).

References to regulations in this section are references to those regulations, unless otherwise stated.

This is a specialist area and more comprehensive guidance is available in the Company Taxation Manual (CTM) from CTM92505 onwards. This section gives an outline and some specific, COTAX related procedural guidance.

Many QIP cases have their tax paid through a Group Payment Arrangement. For more information see COM96000 onwards and the Company Taxation Manual (CTM) at CT92505 onwards.

Large companies have to pay their liability in instalments rather than in one lump sum nine months and one day after the end of the AP. Two of the instalments are normally due before the end of the AP.

A company is large if its profits for the AP exceed the upper limit that applies at the end of that period. The upper limit is defined in Part 3, Provision 24 CTA2010.

Notes:

  • Profits mean chargeable profits plus non-group franked investment income.
  • The upper limit is reduced proportionately when the AP is less than 12 months.
  • When the company has 51 per cent group companies, the upper limit is reduced by dividing the upper limit by one plus the number of those companies.
  • Extra Statutory Concession C9 applies when you consider the number of 51 per cent group companies.

For APs ending on or after 1 July 2000, if a company’s total tax liability does not exceed £10,000, proportionately reduced if the AP is less than 12 months, the company does not have to pay by instalments. This means some companies in a group may have to make instalment payments while others do not.

Companies do not have to pay their CT by instalments in an AP if:

  • they were not large in the 12 months preceding the AP except because of this exemption and
  • the profits for this AP do not exceed £10 million.

COTAX cannot apply the ‘companies becoming large’ exemption at Regulation 3(3) (see Company Taxation Manual at CTM92530), so a proportion of cases that COTAX enters on the Quarterly Payer Review List (QPRW) may escape under that provision. You must consider whether the exemption applies when dealing with cases on this list.

Where there are 51 per cent group companies, the £10 million threshold is divided by one plus the number of group companies. The number of related 51 per cent group companies to be taken is usually the number existing at the end of the immediately preceding AP. The threshold is also proportionately reduced for short APs. The Company Taxation Manual gives examples at CTM92520 and CTM92530.

If a company:

  • concludes that it has paid too little tax to date, it should make a top-up payment
  • considers that it has paid too much, it may deduct the excess from the next instalment payment
  • believes the payments to date total more than the cumulative liability, they may claim repayment under Regulation 6. For more information see COM125060 and CTM92650. Such claims are dealt with by the responsible office.

Top-up payment or payments or a claim to repayment may be made at any time.

Companies that are not large do not have to pay their CT by instalments, but have to pay their full liability by the normal due date.

Companies must indicate on their company tax return if they are liable to make instalment payments. This information is captured when the return is submitted. If the return is subsequently unlogged, COTAX automatically changes the ‘QIP’ signal to ‘N’.

Debit interest is charged where insufficient tax is paid by the instalment due dates, or instalments are paid late. We pay credit interest where more than the tax due is paid by the instalment due dates, or the tax is paid early. For more information see COM80000 onwards.