Corporation tax quarterly instalment payments

2 min read

Large companiespay in instalments

QIPsquarterly

Some earlybefore year end

Who pays instalments

Companies with profits above a threshold (broadly £1.5 million, reduced for groups) are "large" and must pay corporation tax in quarterly instalment payments (QIPs) rather than a single sum. "Very large" companies pay even earlier. Most SMEs pay the normal way — but growth can push you over.

The timing shock

For large companies, instalments fall during and shortly after the accounting period — so you pay tax on profit you are still earning, based on an estimate. That is a very different cash-flow profile from paying nine months after year end, and crossing the threshold catches companies out.

Estimating the payments

Because instalments are due before final profits are known, you must estimate the year's liability and pay accordingly, truing up later. Under- or over-estimating has consequences — interest on underpayments — so careful forecasting is essential.

Planning for it

A company approaching the threshold should model the switch to instalments well ahead, because it pulls tax payments forward by months. Build the QIP dates into your cash-flow forecast so they never surprise you.

Funding the shift

The move to instalments can create a one-off cash squeeze as payments bunch. A working-capital facility smooths the transition.

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Frequently asked questions

Who has to pay corporation tax in instalments?

Large companies — broadly those with profits over £1.5 million, reduced for groups — must pay in quarterly instalments. Very large companies pay even earlier. Most smaller companies pay in a single sum nine months after year end.

Why are instalment payments a cash-flow shock?

Because they fall during and shortly after the accounting period, so you pay tax on profit you are still earning, based on estimates — a very different profile from paying nine months after year end. Crossing the threshold catches companies out.

How do I plan for corporation tax instalments?

Model the switch well before you cross the threshold, estimate the year's liability carefully, and build the instalment dates into your cash-flow forecast so the earlier, bunched payments never surprise you.