Summer Budget 2015: Advanced payment of corporation tax

For an up-to-date summary please visit our budget updates page.

As part of the Summer Budget 2015, George Osborne announced plans to further advance corporation tax payments from companies with profits in excess of £20 million.

At first hand, this measure seems to affect only larger, profit making companies.  However, there is a sting in the tail.

What is the measure?

With effect from 1 April 2017, companies with annual taxable profits of £20 million or more will be required to make earlier, more advanced quarterly payments than they do now.

Currently, those companies caught within the quarterly payment regime are expected to pay instalments 6 months and 13 days following the start of the relevant accounting period.  Subsequent payments are made at 3 month intervals.

Companies with accounting periods starting on or after 1 April 2017, which are affected by the change, will be required to make payments at months 3, 6, 9 and 12.  This advances the payments they would make under the existing scheme by 4 months.

What is the sting in the tail?

Whilst the threshold of annual taxable profits of £20million seems relatively high, UK companies which are members of wider international groups may be easily caught by the new payment regime.  It is envisaged that the threshold will be divided by the number of companies within the group, meaning those companies with lower profits are still at risk of being caught within the new payment regime.

Next steps

Draft legislation will be published in the Autumn.  We will review the detail and provide further updates in terms of the measure.  It is imperative that UK companies within wider groups consider the cash flow effects of being caught within the new payment regime from 1 April 2017.