Corporation tax: Quarterly Instalment Payment cases
Large companies have to pay their corporation tax (CT) in quarterly instalments for accounting periods (AP)s ended on or after 1 July 1999 (see COTAX Manual COM95000).
This arrangement replaced the normal rules, that still apply for all other companies, of tax being due in one sum at the normal due date (NDD) of nine months and one day after the end of the AP.
Recovery action commenced before the NDD
The company tax return in a QIP case may be received at any time after the end of the accounting period. If the return shows any tax unpaid you can take recovery action to enforce payment after the last quarterly payment has become due (3 months and 14 days after the accounting period ends) even though that may be before the NDD.
CT unpaid in a QIP case and it is before the QPI 4 due date
If a return shows CT unpaid in a QIP case and it is before the last quarterly payment (QPI 4) is due, B/F the case to the date QPI 4 is due (recovery action cannot be taken before that date).
When the B/F expires, pursue as in “After QPI 4 due” below.
CT unpaid in a QIP case and it is after QPI 4 due date
Take effective action whether by letter, telephone or personal call (see COM ‘Pursuit, Automatic Pursuit’ and the appropriate debt management process maps).
Debit interest up to and including the date of the recovery action should be calculated using COTAX function CINT (see item 2 of COTIN 9 for details of how to use the function) and included in any telephone conversation, letter and or personal call.
The details and an explanation of the calculation should be noted on IDMS action history for information purposes.
Where enforcement action is required
- Take enforcement action in the usual manner. In England and Wales only note that these cases are not suitable for the County Court Bulk Centre
- calculate debit interest to the date of the enforcement action using COTAX Function CINT (see Item 2 of COTIN 9 for details of how to use the function)
- include the amount of the calculation in any claim issued.
- do not create the debit interest charge on the COTAX/IDMS records. The debit interest charge will be automatically posted on record after the NDD. See the COM Manual for further information about interest. See the COTAX Manual COM80000 for further information about interest
- record details and an explanation of the debit interest calculation on IDMS action history for information purposes as there will not be an IDMS work item that relates to the calculation.
Credit, debit and late payment interest
Two different types of interest - debit interest and late payment interest (LPI) - may be chargeable on unpaid CT. Additionally credit interest is payable to the company when the amount of tax paid by the company exceeds the amount it was required to pay under the QIP rules.
Credit interest, debit interest and LPI are charged at different rates. You can find details of the rates of interest on the HMRC Internet site, accessible from the COTAX website or from the Intranet.
Credit interest is payable where payment has exceeded the amount it was required to pay. It may be paid to any company, not just a QIP payer. Credit Interest is not calculated or posted on the company’s COTAX record until a self assessment has been recorded or a Revenue Determination has been made and the normal due date has been reached.
You can identify credit interest by the posting code ‘ICR’ when you use function VPDD.
Credit interest is credited firstly to any unpaid tax, then to any unpaid penalties and then against any debit interest.
Debit interest is chargeable under TMA1970\S87A as extended by Regulation 7 of the Corporation Tax (Instalments Payments) Regulations SI 1998, no.3175. It only applies to large companies that are subject to the instalment provisions.
You can identify debit interest by the posting code ‘IDB’ when you use function VPDD. Debit interest is not calculated or posted on the company’s COTAX record until a self assessment has been recorded or a Revenue Determination has been made and the normal due date has been reached.
Debit interest is charged on any unpaid tax where the amount of tax paid is less than that it was required to pay, up to the NDD. LPI is charged where any tax is unpaid after the NDD.
Late Payment Interest
Late payment interest (LPI) applies to all types of company.
From the day after the NDD, LPI is charged on any unpaid tax under Section 87A of the Taxes Management Act 1970. Debit interest may have already been charged on the same unpaid amount.
You can identify late payment interest by the posting code ‘IDE’ when you use function VPDD.
Negative payment interest included in a collectable balance following a credit interest recalculation does not attract late payment interest (see COTAX Manual COM80050).
Where the enforcement action is not completed before the NDD
Distraint (England and Wales and Northern Ireland)
In distraint cases, where the action is not completed before the NDD, debit interest will be calculated to the NDD and will be shown on the COTAX record after the NDD has passed. You should calculate LPI from the NDD to the date of payment.
County Court Proceedings (England and Wales only)
In CCP cases, where you anticipate that the NDD for the CT might occur before entry of judgment, you will need to include provision for both debit and late payment interest in your claim.
As a general rule, you should include such provision in any county court action that begins up to 3 months before the NDD. In other cases where exceptionally, you have not entered judgment and the NDD is approaching, or has passed, you should seek consent of the defence, or leave of the court, to amend the claim to reflect the changed interest rates.
Debit interest is calculated to the NDD inclusive and the charge will be shown on COTAX after the NDD has passed whenever a return has been processed.
Late payment interest (LPI) is chargeable from the day after the NDD. You can calculate LPI using COTAX Function CINT.
Recovery action after the NDD
Where you have to enforce the CT debt, COTAX will have calculated debit interest to the NDD and LPI from the NDD onwards.
You will need to calculate LPI accruing to the date of proceedings. Do not enter the (LPI) interest charge on record (the interest charge will be posted on record after payment in full has been made)