Although not a new measure, where a company has profits in excess of £1,500,000 a year it is required to estimate and pay corporation tax quarterly during the year, rather than 9 months after the end of its accounting period. What has changed since 1 April 2023 is that the £1,500,000 threshold is divided by the number of “associated companies” in the accounting period, as defined above. Thus, if a company has two associated companies, if any of them has profits in excess of £500,000, quarterly instalments of corporation tax will be required. If that company has a 31 March 2024 year end, it needs to pay its estimated corporation tax liability according to the following schedule:
- 25% of its estimated liability by 14 October 2023
- 50% of its estimated liability by 14 January 2024
- 75% of its estimated liability by 14 April 2024
- 100% of its corporation tax liability by 14 July 2024
As mentioned above, accurate profit forecasts are required in order to compute the quarterly payments.
Note that this is a significant acceleration of tax payments compared to the normal 9-month payment interval. Consequently, there is a one year “grace period” that applies for the first year the threshold is breached. You might also wish to consider minimizing the number of associated companies to avoid this cash flow disadvantage.