Corporate interest restriction: Instalment payments - KPMG United Kingdom
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Corporate interest restriction ‘devil is in the detail’ – quarterly instalment payments

Corporate interest restriction: Instalment payments

This week’s article looks at how quarterly instalment payments of corporation tax may be impacted by the new CIR rules.


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This is the fifteenth of our series of articles looking at some of the detail of the new corporate interest restriction (CIR) rules, and this week we consider the impact of the rules on large companies’ quarterly instalment payments (QIPs) of corporation tax. The Government has now confirmed that the CIR legislation will be included in a Finance Bill, to be introduced as soon as possible after the summer recess, with the start date continuing to be 1 April 2017. Companies will therefore want to factor in the potential impact of the CIR rules for their tax liability in calculating their QIPs.

To the extent the company has ignored (or under-estimated) the impact of
the CIR rules on its tax liability when calculating previous QIPs, the company
may also wish to consider increasing future QIPs to cover the shortfall in the
previous instalments (so called ’top-up’ payments). In practice, the company
would factor in any CIR shortfall as part of a wider assessment of all other
factors that might have affected the company’s estimate of its taxable profits
since the date of the previous QIP.

Practical points
In deciding whether (and if so how) to factor in the potential impact of the CIR rules on QIPs, three key points to take into account will be:

  • The effective date from when the CIR rules will apply (which has now been confirmed as 1st April 2017, subject to final enactment); 
  • The proportion of the accounting period that would be affected by the CIR rules; and 
  • The date on which the QIPs for that period fall due.

The following table illustrates these points:

Accounting period straddling 1.4.17 QIPs
for the accounting period
of period to which CIR applies (assuming a 1.4.17 start date)
1 July 16 to 30 June 17 14 Jan 17; 14 April 17; 14 July 17; 14 Oct 17. 25 percent
1 Oct 16 to 30 Sept 17 14 April 17; 14 July 17; 14 Oct 17; 14 Jan 18. 50 percent
1 Jan 17 to 31 Dec 17 14 July 17; 14 Oct 17; 14 Jan 18; 14 April 18. 75 percent 
1 April 17 to 31 March 18 14 Oct 17; 14 Jan 18; 14 April 18; 14 July 18.
100 percent 

The final column illustrates that the impact of factoring in potential CIR disallowances will vary depending on the portion of the period to which the CIR rules apply.

Practical considerations in group scenarios – benefit of Group Payments Arrangements (GPA)
Where the group has a disallowance under the CIR rules, the allocation between companies is likely to be finalised after the final QIP is made. If a GPA is in place, it should be possible to allocate tax payments to companies which mirror their final liabilities to minimise the exposure to interest on late paid tax.

Actions taken before the start date of the legislation was confirmed

Before the start date was confirmed, companies may have ignored the potential implications of the CIR rules for the company’s CT liability, while accepting that interest would ultimately be due to the extent the CIR rules caused the company’s final CT liability to be higher than the estimated liability ignoring CIR.

If the latter approach were adopted, HMRC should not have any legitimate grounds for seeking to apply penalties. In circumstances where the commencement date for CIR has been uncertain, failing to factor in the impact of those rules should not be regarded as ‘deliberate or reckless’ underpayment of tax.

The previous articles in this series can be found here.

For further information please contact:

Rob Norris

Richard Rudman

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