These regulations introduce the new quarterly instalment payments regime for very large businesses.
At the Summer Budget 2015, the Government announced changes to the quarterly instalment payments (QIPs) regime, which were then deferred following a second announcement at Budget 2016. The Corporation Tax (Instalment Payments) (Amendment) Regulations 2017 have now been published to implement these changes. In summary, for accounting periods beginning on or after 1 April 2019, very large companies will be required to make payments four months earlier than currently. For a 12 month accounting period, payments will be due in months 3, 6, 9 and 12 of the period to which the liability relates.
The regulations introduce a new definition of very large company, being a company whose annual profits exceed £20 million. This threshold is adjusted if the company is a member of a group or has an accounting period shorter than 12 months. For companies with annual taxable profits of £20 million or less, payment dates will not change.
Under the old rules, companies subject to the bank levy were all classed as large. Following the new rules, they will be classed as very large if their annual profits exceed £20 million, or large otherwise. If a company that pays bank levy is now classed as very large, the payments of bank levy will not move to the new QIP dates, but other CT liabilities will.
The key impact of these changes for companies classed as very large under the new rules will be on cash flow. Not only will QIPs now be payable earlier on a regular basis, but in the first year the new regime will be applicable, the first instalment payment will be due before the final instalment of the previous accounting period subject to the old regime, and only two months after the third instalment. Businesses should make sure they are prepared for the cash flow difficulties this may cause. In addition, forecasting taxable profits at such an early stage in the accounting period may cause issues for businesses, especially those with fluctuating profits.
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