Businesses dealing with buying and selling properties, antiques, expensive jewelries and watches are likely to be affected by the HM Revenue and Customs Quarterly Instalments Scheme imposed on large companies.
Large Companies
A company with an accounting profit of more than £1.5 million is classified as large company and therefore is required to pay its corporation tax in advance in four installments within a twelve-month period.
However, there is an exception to help growing companies. Where a company’s accounting profit exceeded £1.5 million but less than £10 million for the first time in its trading year, the company will not have to pay its corporation tax by quarterly instalments.
Where there are associated companies or companies within a group, that £10 million threshold will be divided by one plus the number of associates at the end of the previous accounting period.
Accounting records
The onus is on the companies to estimate their accounting profits for the purpose of making tax payments. Therefore, it is important companies to have a proper accounting system in place to monitor the profits and business transactions.
Notify HMRC when your company profit is likely to exceed the thresholds and start making quarterly installment payments. The unpaid installment payments carry penalty interest at a special rate imposed by the tax office, from the due date to the date of payment.
Oversight
There is no excuse for first time oversight. The HMRC will back date the penalty interest payable based on the final CT600 submitted to them by reference to the profits in the company accounts.
When to make Quarterly Instalments Payments?
Instalments are due at the intervals of three months commencing 6 months and 13 days from the start of the accounting period and culminating 3 months and 14 days from its end. Therefore, for 12 month accounting period there will be 4 installments.
For a company with a 12 month accounting period starting on 1 January, Quarterly Instalment Payments will be due on 14 July, 14 October, 14 January and 14 April.
Canterbury Accountancy – Taxation solutions for large businesses
